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How does China’s green credit policy affect the green innovation of heavily polluting enterprises? The perspective of substantive and strategic innovations

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Abstract

Green credit policy is an important practice to guide green development through the rational allocation of credit funds. Using the promulgation of the “Green Credit Guidelines” policy in China as a quasi-natural experiment, this paper examines the impact of green credit policy on heavily polluting enterprises’ substantive and strategic green innovations within a difference-in-differences framework. We find that green credit policy improves the overall and strategic green innovations but has no significant effect on substantive green innovation of heavily polluting enterprises. Moreover, this effect is more prominent for state-owned enterprises and enterprises in regions with lower levels of financial development. Further analysis demonstrates that the green innovation induced by green credit policy increases heavily polluting enterprises’ loan availability but does not improve heavily polluting enterprises’ value. This paper sheds new light on the relationship between green credit policy and corporate green innovation in China as a transition economy.

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Data availability

The datasets generated and/or analyzed during the current study are not publicly available due privacy or ethical restrictions but are available from the corresponding author on reasonable request.

Notes

  1. Based on the regulatory approaches, the environmental regulation tools can be divided into command-and-control regulation and market-based incentive regulation. See Tang et al. (2020) for a comprehensive review of China’s environmental regulations.

  2. In this paper, substantive green innovation aims at driving green technological progress and enhancing green competitive advantage, which is high-quality green innovation (Hu et al. 2020; Liao 2020). Strategic green innovation aims at obtaining more green credit support, which is manifested as valuing quantity rather than the quality of green innovation and is a simple green innovation (Yan and Wu 2020; Jiang and Bai 2022).

  3. The reasons are as follows: (1) we exclude financial industries because of their distinct accounting system (Hong et al. 2021); (2) this paper focuses on China’s heavily polluting enterprises. Nevertheless, green credit policy affects both heavily polluting industries and environmental protection industries. Therefore, following Zhang et al. (2021c), we exclude other environment-friendly firms that are sensitive to the green credit policy; (3) since a firm’s green patent application directly affects its motivation to carry out green innovation activities, to meet the research needs, we exclude firms without any green patent applications (Li and Zheng 2016).

  4. According to the “Industry Classification Guidelines for Listed Companies” revised by the China Securities Regulatory Commission in 2012, the two-digit industry codes for heavy polluting industries are B06 (coal mining and washing), B07 (oil and gas extraction), B08 (ferrous metal mining), B09 (non-ferrous metal mining), C17 (textiles), C19 (leather, fur, feathers and their products and footwear), C22 (paper and paper products), C25 (petroleum processing, coking and nuclear fuel processing), C26 (chemical raw materials and chemical products), C28 (chemical fiber manufacturing), C29 (rubber and plastic products), C30 (non-metallic mineral products), C31 (ferrous metal smelting and rolling processing), C32 (non-ferrous metal smelting and rolling processing), and D44 (electricity, heat production and supply).

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Acknowledgements

We would like to thank the anonymous referees for their helpful suggestions and corrections on the earlier draft of our paper, upon which we have improved the content.

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  1. School of Economics and Management, Southeast University, 2# Southeast University Road, Jiangning District, Jiangsu Province, Nanjing, 210096, China

    Qi Liu & Bin Dong

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  1. Qi Liu
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Qi Liu analyzed the data and wrote the complete paper. Bin Dong read and approved the final version. All the authors contributed to the manuscript revision, read and approved the submitted version.

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Liu, Q., Dong, B. How does China’s green credit policy affect the green innovation of heavily polluting enterprises? The perspective of substantive and strategic innovations. Environ Sci Pollut Res 29, 77113–77130 (2022). https://doi.org/10.1007/s11356-022-21199-6

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