Is Promoting Green Finance in Line with the Long-Term Market Mechanism? The Perspective of Chinese Commercial Banks

Abstract

Green finance is a sustainable force in promoting green development. China’s social financing structure determines the key role that green credit plays in sustainable development. Under the dual pressure of future economic downturn and huge capital gaps, it is worth exploring whether to continue promoting green credit that conforms to the long-term market mechanism. From the perspective of Chinese commercial banks, this paper analyzes whether promoting green credit is compatible with the incentives and their profit maximization goals. To this end, the research in this paper is based on the following three aspects: (1) Based on financial analysis, this paper reveals the different pricing of green industries in the capital market and credit market and explains the mechanism through which green credit policies improve the operating conditions of commercial banks; (2) combined with the conclusions from the literature and financial analysis, the influence of different index types on the modeling results is analyzed, and it is determined that the main reasons causing a decline in the return on assets are the excessive expansion of capital and the decline in internal resource-use efficiency; (3) a data envelopment model (more accurately, SBM-DDF) with undesirable outputs is established to dynamically analyze the operating efficiency of Chinese commercial banks, and the role of green credit in improving efficiency is studied. The main conclusions of this paper are as follows: if Chinese commercial banks increase their proportion of green credit, they can not only increase their profit scale but also improve and optimize the allocation of their internal resources, thus improving their operating efficiency. The main sample of this study comprises 43 commercial banks in China from 2007 to 2020.