Will Green Credit Affect the Cash Flow of Heavily Polluting Enterprises?

Yi Sun, Yiwen Zhu, Cong Li () and Kaihua Wang ()
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Yi Sun: School of Economics, Qingdao University, Qingdao 266071, China
Yiwen Zhu: School of Economics, Qingdao University, Qingdao 266071, China
Cong Li: School of Marxism, Party School of the Central Committee of the Communist Party of China (National Academy of Governance), Beijing 100091, China
Kaihua Wang: School of Economics, Qingdao University, Qingdao 266071, China

Sustainability, 2025, vol. 17, issue 1, 1-24

Abstract: As environmental pollution intensifies, China has begun to implement green credit policies to reduce credit allocation to highly polluting enterprises. This research examines the influence of green credit on the cash flow of heavily polluting enterprises, based on the implementation of the “Green Credit Guidelines”. The policy creates a quasi-natural experimental setting by giving businesses access to an exogenous occurrence. Consequently, this paper uses data from 494 A-share listed companies in China over a fifteen-year period from 2007 to 2021 and employs a Difference-in-Differences (DID) model to assess the net effect of the policy, positing that green credit scheme will prevent highly polluting businesses from making money. The empirical findings show that the green credit policy significantly reduces the cash flow of businesses that emit a lot of pollutants, especially when it comes to operational cash flow. Heterogeneity analysis reveals that the cash flow of high-emission regions and non-state-owned heavily polluting enterprises is affected even more significantly. Previous research has often overlooked cash flow as a metric; however, cash flow is a critical indicator of an enterprise’s operational status. From this angle, this study adds to our knowledge of how green credit schemes affect highly polluting businesses. Additionally, it contributes to the ongoing discussion regarding the relationship between financial constraints and cash flow. China’s government ought to keep encouraging the creation of green credit regulations, enhance supervision of state-owned heavily polluting enterprises, and pay attention to low-emission regions by establishing dynamic regulatory indicators to promote ecological civilization construction and the transformation and upgrading of lagging industries.

Keywords: green finance; green credit; cash flow; DID; policy evaluation (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
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