Green credit, financing constraints, and corporate investment: From the perspectives of scale and efficiency

Green credit plays a crucial role in resource allocation as it serves as a link between financial systems and environmental protection. This study utilizes the "Green Credit Guidelines" issued by the China Banking Regulatory Commission in 2012 as an exogenous shock, employing the Difference-in-Differences (DID) approach to examine the impact of green credit policies on corporate investment levels. The findings reveal that green credit enhances investment efficiency by reducing the investment scale of high-pollution enterprises. Furthermore, considering the temporal nature of policy impact and strategic responses from enterprises, these effects become evident and increasingly strengthened two years after policy implementation. The financing constraint intermediary mechanism suggests that financing constraints only serve as an intermediary factor between green credit policies and investment efficiency, exerting relatively weak control over short-term investment scales. Additionally, internal and external regulatory mechanisms along with enterprise heterogeneity indicate asymmetric effects resulting from green credit policies. Policy implications derived from this research emphasize the necessity for a rational combination of command-and-control environmental regulations with green credit policies while also improving upon existing green credit measures to prevent strategic corporate behavior.