The impact of green credit policy on firms' green strategy choices: green innovation or green-washing?

Taking the green credit policy in 2012 as a quasi-natural experiment, this paper has investigated the impact of green credit policy on Chinese firms' green strategy choices by using the panel data of A-share listed firms from 2008 to 2019. The results reveal that green credit improves firms' green innovation overall. In terms of time, the green-washing behavior of listed firms will increase significantly in the early stage of the implementation of green credit policy, but as time goes by, such green behavior of firms will be detected, which in turn will motivate firms to improve green innovation. Furthermore, the green credit policy has a more significant effect on green innovation of firms in localities under high environmental regulation, economically developed regions, and without other alternative financing channels. Firms located in regions with economically underdeveloped and low environmental regulation are more inclined to adopt the behavior of green-washing environmental information. Besides, after the implementation of the green credit policy, green innovation can improve corporate financial, environmental, and social performance, while green-washing behavior will damage corporate financial, environmental, and social performance. Our findings contribute to the literature on green credit policy, corporate green innovation, and environmental information disclosure, and also provide policy implications for improving the quality of green credit policy in the future.