Does green credit policy promote corporate green innovation? Evidence from China

Green innovation is an important strategy for companies to achieve sustainable development goals. In addition to helping companies create a green image and improve their competitive advantage, green innovation can reduce pollution and improve the ecological and social environment, with positive external effects. The green credit policy (GCP) is an addition to traditional environmental regulations. Taking the 2012 Green Credit Guidelines as a quasi-natural experiment, this study finds that GCP significantly reduces the quantity and quality of green innovation in green credit-restricted firms by discouraging enterprises' debt financing. Heterogeneity analysis showed that the negative impact was concentrated mainly on non-state-owned enterprises (non-SOEs). This study recommends diversifying financing channels to ease corporate debt financing constraints. The conclusions could enrich existing research on the economic consequences of environmental regulatory policies and provide a reference for the strategic planning of green innovation development in enterprises.