Does Green Credit Policy Promote or Inhibit Firms' Green Innovation in China? Moderating Effect of Environmental Information Disclosure

Green credit policy (GCP) serves as an important tool for environmental protection and economy development. However, conflicting evidence exists regarding its role in affecting firms' green innovation. China's GCP practice provides an opportunity to explore this issue in the context of developing economies. Taking the implementation of the "Green Credit Guidelines" in China in 2012 as an exogenous shock, this paper adopts the difference-in-differences (DIDs) method to separately explore GCP's effect on green innovation of non-heavily polluting firms (non-HPFs) and heavily polluting firms (HPFs). Based on the microdata of Chinese firms from 2008 to 2020, this study finds that: (1) GCP promotes green innovation of non-HPFs, but inhibits green innovation of HPFs. (2) GCP's promoting effect on green innovation of non-HPFs is more prominent in large-sized firms, regions with a higher financial development level, and regions with a higher pollution level. (3) GCP's inhibiting effect on green innovation of HPFs is less prominent in regions with higher financial development level. (4) Environmental information disclosure (EID) strengthens GCP's promoting effect on green innovation of non-HPFs. Overall, these findings help practitioners to better understand the impact of GCP on firms' green innovation in developing countries.