Can green credit increase firm value? Evidence from Chinese listed new energy companies

Research on the development strategy selection of the new energy vehicle industry from the perspective of green credit-Based on the foursquare evolutionary game analysis

Developing new energy vehicles is vital to promote green development and the harmonious coexistence of humans and nature. It is also the only way to help China move from a significant automobile country to a powerful automobile country. Based on the background of the "recession" of government subsidies and considering the importance of green credit in promoting green and low-carbon transformation, this paper constructs a four-party evolutionary game model that includes government, automotive companies, banks, and consumers to analyze the stability of the strategic choices of various parties in the development process of the new energy vehicle industry. It uses MATLAB simulation tools to analyze the impact of relevant factors on system stability. The research shows that: (1) The government's subsidy mechanism significantly promotes the development of the new energy vehicle industry. Still, there is a subsidy threshold, beyond which the effect will weaken and quickly bring financial pressure. (2) With the gradual decline of government subsidies, the bank's green credit policy has a specific policy complementary effect on the decline of government subsidies. (3) Considering that costs and benefits are the main influencing factors for automotive companies and consumers' strategic choices, the impact of factors such as the punishment of violations, adjustment of subsidy policies, and consumers' environmental awareness must also be paid attention to.

Does green credit help reduce smog pollution? Empirical evidence from China

As a resource production factor in environmental governance activities, can green credit help reduce smog pollution? Based on China's provincial panel data from 2006 to 2019, this paper empirically tests the impact of green credit on smog pollution by using an OLS regression model and a spatial Durbin model. The results show that green credit helps to reduce smog pollution overall; Industrial structure upgrading and green technology innovation are two critical paths for green credit to reduce smog pollution. The analysis of period heterogeneity finds that the descending effect of green credit on smog pollution becomes more significant after the transformation of China's economic development stage. The regional heterogeneity analysis finds that the descending effect of green credit on smog pollution is more significant in non-low-carbon pilot provinces and regions with lower economic development levels. In addition, green credit not only helps to reduce local smog pollution but also has a spatial spillover effect of "benefiting thy neighbors" on smog pollution in geographically neighboring areas. This study provides important inspiration for the government to further promote the innovation of green financial instruments and promote the improvement of environmental governance performance, provides decision-making references for different regions to implement differentiated green credit strategies to improve ambient air quality, and provides an experience reference for the development of green finance and environmental governance in emerging market countries.

The road to green innovation in agriculture: the impact of green agriculture demonstration zone on corporate green innovation

Agricultural green transformation is crucial for addressing environmental issues like pollution and soil degradation. However, limited attention has been given to its determinants in the existing literature. This study extends the "Porter hypothesis" in agricultural economics and discusses the institutional factors influencing green transformation in Chinese agricultural enterprises from the perspective of environmental regulations. Using data from 2007 to 2020, we examine the impact of the green agriculture demonstration zone (GADZ) policy on green innovation in Chinese A-share listed agribusinesses. The results show that the policy significantly improves green innovation, leading to a 9.9% increase in patent applications. We also find that the GADZ promotes green innovation in agricultural businesses through two economic mechanisms, reducing financial risks and enhancing media attention. In addition, the policy's effect is influenced by property rights, information disclosure quality, and financial resources. Our findings offer valuable insights for promoting green innovation and high-quality agricultural development in emerging economies.

The impact of green credits on high-quality energy development: evidence from China

The implementation of green credits has become an important engine for China's high-quality energy development (HQED). On the basis of constructing an index of HQED and the panel data of thirty provinces in China from 2008 to 2019, this study empirically investigated the effects of green credits on HQED and the action mechanisms behind it in a multi-dimensional manner using a panel fixed-effects model, mediating-effects model, and spatial Durbin model. The results indicated that green credits had significantly contributed to China's HQED, and that conclusion still held true after a series of robustness tests were conducted. It was found that industrial structures and human capital were important channels through which green credits influenced China's HQED. Moreover, the spatial spillover effects of green credits on HQED were also confirmed. Finally, in terms of temporal heterogeneity, the positive effects of green credits on HQED were found to have increased significantly after 2012. Also, in terms of regional heterogeneity, this study observed that the positive influence of green credits on HQED was more significantly in central and western China than in eastern China, and in southern China than in northern China. The results obtained in this research investigation will potentially provide some important insights for energy planners and policymakers to further the understanding of the drivers of HQED, and the corresponding transmission mechanisms and regional differences.

Simulation study on the development decision of new energy manufacturers under the weight of consumption responsibility

In 2019, China proposed the weight of consumption responsibility (WCR) policy for renewable energy. This study first analyzes the interaction between the electricity market and the green certificate market and establishes a two-market equilibrium model with multiple subjects. Secondly, a system dynamics model of the development decision of the new energy manufacturers (NEMs) under the interaction of the two markets is established. Finally, taking Henan province as an example, the development trend of NEMs is simulated, and sensitivity analysis is conducted to explore the key influencing factors for the development of NEMs. The results show that the electricity market and the green certificate market interact with each other mainly through the price of electricity and the price of green certificates, thus evolving the trading behavior of trading subjects. By 2035, for every 0.25% increase in non-hydropower WCR in Henan province, the annual added new energy installation will be around 1200 MW. In the current scenario, the policy of certificate multiplier will be detrimental to the overall development of NEMs, and a conservative investment strategy and accelerated technology improvements are more beneficial to NEMs. Carbon emission peaking and carbon neutrality policies can also accelerate the growth of new energy installations.

Does green credit policy mitigate financialization? Evidence from Chinese heavily polluting enterprises

Green credit policy is an important tool to use financial credit resources to stimulate heavily polluting enterprises to change their production methods. This paper constructs a difference-in-differences model based on the quasi-natural experiment of the green credit policy promulgated in 2007 to explore the impact of environmental regulation on the financialization of heavily polluting enterprises and its mechanism. The empirical results show that the green credit policy significantly inhibits the financialization of heavily polluting enterprises, especially for speculative financial assets. This inhibitory effect is more significant in non-state-owned enterprises, enterprises with severe financing constraints, highly competitive industries, and the eastern region. Furthermore, we find that the green credit policy inhibits the financialization of heavily polluting firms by promoting green innovation, mitigating agency problem, and improving media supervision. At the same time, the 2012 Green Credit Guidelines still have an inhibitory effect on the financialization of heavily polluting enterprises from 2009 to 2019, reflecting that China's green credit policy system has a continuous guiding role in the rational allocation of financial assets of heavily polluting enterprises.

Save the environment, get financing! How China is protecting the environment with green credit policies?

Green credit policy (GCP) can achieve economic growth and environmental conservation, notably by lowering air pollutants (PM2.5). Green credit is a significant component of China's green financing for environmental regulation and achieving carbon neutrality. In this paper, to understand the causal relationship between GCP and PM2.5, we apply a bootstrap full-sample Granger causality test, parameter stability test, and quantile-on-quantile test for the period between 2003:M01 to 2019:M12. The result shows a bidirectional relationship and reveals that GCP has varied environmental implications in its early and mature stages because of a low percentage of green credit and a lack of motivation for financial institutions. In the long run, GCP and PM2.5 interaction confirm the favorable effects of GCP on PM2.5 as the green credit system improves. For robustness, we used quantile-based granger causality to evaluate the causative link between GCP and PM2.5. In light of the findings, this research advises legislative reforms and stresses the relevance of green credit in improving air quality. This study adds additional evidence that air pollution affects green credit policies. Air quality being a leading indicator helps firms anticipate changes in bank credit preferences and alter financing techniques.

Does green credit promote green sustainable development in regional economies?—Empirical evidence from 280 cities in China

Background

China has been exploring a sustainable development path that harmonizes economic growth and environmental protection, targeting to build a beautiful China. The role of green finance in adjusting the misallocation of financial resources and leading the green sustainable development of the real economy is receiving increasingly more attention. Currently, green credit accounts for more than 90% of the total green finance funding in China and constitutes the most significant component of the green finance matrix. Whether green credit effectively promotes the green and sustainable development of the regional economy largely determines the success of China’s economic green transformation.

Objective

Existing studies of green credit mainly focus on its influences on financing, investment, and emission reduction of environmental pollution industries or companies. Extending the literature by exploring whether green credit is effective in promoting green sustainable development and what impact green credit exerts on the upstream (energy inputs), midstream (technological innovation), and downstream (pollution outputs) stages of the green sustainable development value chain, is the leading research objective of this paper.

Methods

This paper discusses the impact of green credit on green sustainable development based on city panel data from 2012 to 2019. The level of green sustainable development is calculated by the GML index based on SBM directional distance function. The city-level green credit scale is calculated from the green credit issued by banks, weighted by the density of bank branches in a city. Synthetic control methods are employed in the robustness analysis to reduce the impact of endogeneity issues.

Results and conclusion

The results of this paper indicate that green credit can promote green sustainable development and the impact gradually strengthens over time as the incremental implementations of complementary policies with substantial constraints and incentives, through which pollution control and economic growth achieve a "win-win" situation. Furthermore, the results indicate that green credit reduces the overall amount of energy inputs while optimizing the energy input structure. However, green credit does not boost the green technological level and even crowds out high technical value green innovations. Besides, the pollution reduction effects of green credit are associated with the strength of green credit constraints and the importance of pollution industries in the local economy, which means green credit performs better pollution reduction effects in regions with relatively strong green credit binding effects or in regions where pollution industries are not local economic pillars. The empirical results are further validated through robustness tests, including changing scope and measurement variables and applying the synthetic control method.

Limitations

Although this paper provides valuable contributions to the research area of green credit and green sustainable development, specific limitations exist in the current study. Firstly, as the official information disclosure of green credit in China is not sufficient, existing studies, including ours, could only use estimation methods through different perspectives to measure green credit, which is overall logical and reasonable but may lose some accuracy. Secondly, since there might be a certain degree of lag in the effect of green credit on the economy, the dynamic impact and long-term effects of green credit deserve further study. Thirdly, considering the characteristics of the Chinese administrative systems, introducing the behavior of local governments and local officials into the analysis of green credit and green sustainable development could be valuable.

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

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.

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.

Does digital finance improve the green investment of Chinese listed heavily polluting companies? The perspective of corporate financialization

While now appears appropriate to assert that digital finance can relieve firms' financing constraints, the picture of whether it can improve enterprises' green investment is much less clear. Using 2011-2019 data for Chinese listed heavily polluting (HP) enterprises, we examine the effects of digital finance on corporate green investment. Results show that digital finance impedes HP firms' green investments, and this finding is robust to various tests, including the instrumental variable approach, exogenous shock, and alternative measures of variables. Additional tests reveal that digital finance increases firms' financial investment, which crowds out green investment. Also, this inhibitory impact varies with firms' geographical location, industry characteristics, and the implementation of the new Environmental Protection Law. The findings of this study provide new perspectives on digital finance by identifying its negative impact on the corporate green environment. We also propose corresponding policy recommendations, including strengthening the regulation and guidance of digital finance development, reducing monopolies in the financial sector, and formulating differentiated environmental policies.

The Effect of Green Finance on the Ecological and Environmental Quality of the Yangtze River Economic Belt

Since China's reform and opening up, the speed of economic development has increased significantly. However, at the same time, there are also serious environmental pollution problems. To resolve the deep-seated contradiction between economic growth and environmental protection, green finance has gradually gained attention in China's development. Based on this, the paper explores the impact of green finance on the quality of the ecological environment in the Yangtze River Economic Belt. The main part of the paper is based on panel data of eleven provinces and cities in China's 2011-2020 Yangtze River Economic Belt. Seven indicators, including chemical oxygen demand COD, harmless treatment rate of domestic waste, and green coverage rate of built-up, were used to construct an ecological and environmental quality evaluation index system. The entropy method is used to measure the ecological environment quality level and green finance development level of various provinces and cities in the Yangtze River Economic Belt. The impact of green finance development on ecological environment quality is analyzed using a panel data model. The research results show that: (1) The development level of green finance and the quality of the ecological environment in the Yangtze River Economic Belt have improved between 2011 and 2020. (2) The development of green finance has a significant positive impact on the quality of the ecological environment in the Yangtze River Economic Belt. In addition, related research has focused on the impact of green finance on a certain branch of ecological and environmental quality and lacks an analysis of the overall impact. Therefore, this paper constructs a comprehensive evaluation system for ecological environment quality and analyzes the overall impact of green finance on ecological environment quality in the region.

Corporate climate risk and stock market reaction to performance briefings in China

This study aims to enrich our understanding of the valuation consequence of climate risk in financial markets. The primary focus of our study is on the stock price reaction to firms' climate-risk-related information. We employ transcripts of Chinese listed firms' performance briefings to capture the climate risk at the firm level. Using a sample of Chinese listed firms between 2009 and 2021, we find that greater corporate climate risks lead to negative market reactions over a short time window, consistent with the market quickly comprehending corporate climate risks. This result holds for a series of robustness checks. We further find that the negative impact of corporate climate risk on the stock price reaction operates through the increased market trading activities, greater investor attention, and reduced positive media coverage. Finally, we demonstrate that industry carbon emission, local abnormal temperature, state ownership, institutional shareholding, and dividend payout are important moderators that shape the association of the corporate climate risk and the adverse market reaction. Our evidence suggests that disclosures of climate-related information can help the stock market to price climate risk more efficiently.

The Impact of Green Credit on the Green Innovation Level of Heavy-Polluting Enterprises-Evidence from China

This article uses the "Green Credit Guidelines" promulgated in 2012 as an example to construct a quasi-natural experiment and uses the double difference method to test the impact of the implementation of the "Green Credit Guidelines" on the green innovation activities of heavy-polluting enterprises. The study found that, in comparison to non-heavy polluting enterprises, the implementation of green credit policies inhibited the green innovation of all heavy-polluting enterprises. In the analysis of heterogeneity, this restraint effect did not differ significantly due to the nature of property rights and the company's size. The mechanism test showed that green credit policy limits the efficiency of business investment and increases the cost of financing business debt. Eliminating corporate credit financing, particularly long-term borrowing, negatively impacts the green innovation behavior of listed companies.