Credit policy and its heterogeneous effects on green innovations

Ying Wang and Mingsheng Li

Journal of Financial Stability, 2022, vol. 58, issue C

Abstract: We use the issuance of a new credit policy in China—the Green Credit Guideline (Guideline)—as a unique event and investigate its heterogenous effects on various green technology innovations for different firms in the world’s largest emerging economy. We find that all firms experience a significant increase in green technology innovations after the issuance of the Guideline. Companies with more considerable legitimacy deficiency in environmental compliance are more responsive to the Guideline. The larger increase in green technology innovations for companies with more legitimacy deficiency in environmental compliance is mainly driven by their higher productivity in applicational technology innovations after the Guideline was issued. All firms experience significant improvements in the effectiveness of investments, which is an important channel for increasing green technology innovations. Local legal system development and law enforcement efforts, firms’ political connections, and state ownership are essential mediating factors for green technology innovations, especially for firms with more legitimacy deficiency in environmental compliance. The Guideline positively affects both firm value and reputation, indicating that the new credit policy promotes impact investing.

Keywords: Green innovation; Credit policy; Environmental protection; Chinese markets (search for similar items in EconPapers)
JEL-codes: G32 G38 Q55 Q58 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:58:y:2022:i:c:s1572308921001200

DOI: 10.1016/j.jfs.2021.100961

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