Green credit policy and trade credit: Evidence from a quasi-natural experiment

• The implementation of “Green Credit Guidelines” (GCGs) is used as a quasi-natural experiment. • This paper employs the difference-in-differences approach to study the policy effect. • The policy reduces the trade credit redistribution of high-polluting firms, the impact is via decreasing their bank loans. • The policy effect occurs in areas with higher financial development and firms with higher financial constraints. • The policy effect enhances the environmental protections of high-polluting firms. This paper takes the implementation of “Green Credit Guidelines” (GCGs) as a quasi-natural experiment, and employs a difference-in-differences approach to study the impact of green credit policy on trade credit. The study finds that the implementation of GCGs reduces trade credit of high-polluting firms, the impact is via decreasing their bank loans. Moreover, the policy effect occurs in areas with higher financial development and firms with higher financial constraints. Finally, the policy effect enhances the environmental protections of high-polluting firms. This paper not only expands the literature on the policy effect of green credit, but also provides empirical evidence for the theory of trade credit redistribution.