Corporate financial decision under green credit guidelines: evidence from China

Developing green finance is an important measure for China to achieve a win-win situation between economy and ecology. This study adopts the implementation of Green Credit Guidelines (GCG) in China in 2012 as an intervening event and empirically examines its relative impact on corporate financing and investment using Difference-in-Difference and Difference-in-Difference-in-Difference models. Employing the financial data of A-share listed enterprises from 2009 to 2015, we find that the implementation of GCG restrains the financing and investment behavior of heavily polluting enterprises. The effects of GCG are influenced by institutional factors, and GCG has a more inhibitory effect in the higher polluting, state-owned, and eastern region registered enterprises. This result reveals the importance of GCG in adjusting financial leverage and promoting environmental protection. Policy implications, such as governments should improve incentive and punishment mechanism for heavily polluting enterprises and financial institutions should innovate in green credit business, are proposed.