Assessing the efficacy of green credit policy in fostering green innovation in heavily polluting industries

This paper explores the impact of green credit policy on the green innovation of heavily polluting enterprises by taking the implementation of the "Green Credit Guidelines" in 2012 in China as an exogenous shock. Using the sample of industrial enterprises from the Chinese Industrial Enterprises Database, our empirical results show that, after 2012, the quantity of green innovation represented by the number of green utility model patents and green invention patents is significantly reduced in heavily polluting enterprises. The quality of green innovation represented by the knowledge complexity of green patents increases significantly. The conclusions are valid in a series of robustness tests. The implementation of green credit policy strengthens both the internal financial constraints and the external financial constraints of heavily polluting enterprises. Mediating effect tests reveal that the strengthened internal financial constraints hinder green innovation, while the strengthened external financial constraints promote the knowledge complexity of green patents. There are also firm-level and region-level heterogeneities. The negative effect of green credit policy does not differ between the listed enterprises and non-listed enterprises. It is greater on the green invention patents of the non-state-owned firms. The green innovation of the foreign-owned enterprises declines in all aspects: green utility model patents, green invention patents, and knowledge complexity. Regional intellectual property protection can only significantly mitigate the negative effect on the green utility model patents.Graphical abstractImpact of green credit policy on green innovation