Green credit policy and total factor productivity: Evidence from Chinese listed companies

Abstract

The green credit policy plays a vital role in promoting enterprise upgrading. This study utilizes a comprehensive panel dataset spanning thirteen years (2007–2019) from listed Chinese companies, using the difference-in-differences (DID) method to examine the effects of the Green Credit Guidelines in 2012 (GCG2012) on firm-level total factor productivity (TFP). The findings demonstrate that the GCG2012 policy can effectively promote firm-level TFP in green credit-restricted industries. This finding remains robust even after employing the PSM-DID model, alternating the treatment group and dependent variable, changing the sample period, and controlling for the influence of other environmental policies and financial crises. Notably, this effect is particularly salient among private enterprises, companies with weaker debt-paying ability, those operating in highly competitive industries, and those located in regions with higher financial liberalization. The mechanism tests suggest that enhancing the amplification of green innovation and the curtailment of agency costs (including both green and traditional agency costs) serve as likely conduits for the observed boost in firm-level TFP. This study further uncovers that the effectiveness of the GCG2012 policy permeates not only heavily polluting industries but also those with lesser environmental impact. Furthermore, we establish that the GCG2012 policy contributes substantively to the enhancement of companies' economic performance. In sum, this study sheds light on the micro-mechanisms underlying the long-term impact of the GCG2012 policy on firm-level TFP. It offers empirically grounded insights and policy recommendations to enhance the green credit policy, thereby facilitating sustainable development.