Does the implementation of green credit policy improve the ESG performance of enterprises? Evidence from a quasi-natural experiment in China

The extant literature has largely overlooked how green credit policy (GCP) affects corporate environmental, social, and governance (ESG) performance, which is important in assessing the micro effects of macro-resource allocation. This paper uses the panel data of A-share listed enterprises from 2007 to 2021 in China to investigate the effect of the GCP on corporate ESG performance and its potential mechanism with a difference-in-differences approach. Utilizing the release of the "Green Credit Guidelines" in China as a quasi-natural experiment, we find significant improvement in the ESG performance of green credit-restricted enterprises. Financial constraints and investment efficiency are two plausible channels that affect GCP-enterprise ESG performance nexus. The research results show heterogeneity in enterprise ownership, geographical location, and marketization level. This paper offers convenience for the precise promotion of future green credit policies.