Whether the green credit policy effectively promote green transition of enterprises in China? Empirical analysis and mechanism verification

Promoting green and low-carbon development has become the consensus of the policymakers and the academic, with green transformation of enterprises being the top priority. This paper adopts the difference-in-difference model to investigate the effect of green credit policy on green transition in China, by utilizing the "Green Credit Guidelines" (2012 Guidelines) policy as a quasi-natural experiment. Using panel data from publicly listed companies in China, an empirical investigation is conducted, we explain the dependent variable from two dimensions: economic performance and environmental performance, leading to the following results. First, the green credit policy affects the economic performance and environmental performance of treated firms positively, and the robust tests confirm the reliability of this primary conclusion. Second, the indirect impact of green credit policy on green transition can be explained through two mediating mechanism channels including internal capacity building and external market attention. In addition, the proposal of "Dual Carbon Targets" makes the impact a slight change. Finally, heterogeneous test also shows that the implementation effect of green credit policy is better in non-state-owned enterprises with high political relevance. These findings are providing valuable insights to promote green transition by designing more effective green credit policies.