Green credit policy and environmental outcomes in China: The critical role of local banks in pollution reduction and innovation
Li, Jiaqi, Kim, Ja Ryong, and Adegbite, Emmanuel (2025) Green credit policy and environmental outcomes in China: The critical role of local banks in pollution reduction and innovation. International Journal of Finance & Economics. (In Press)
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Abstract
This research assesses the role of local banks in the environmental consequences of the Green Credit Policy (GCP) implementation in China. Utilizing a sample of 297 cities from 2010 to 2017 and employing a difference-in-difference model, the study examines whether cities with local banks experience a significant reduction in environmental pollution post-GCP implementation. The 2012 introduction of GCP serves as an exogenous shock, revealing that cities with local banks show a substantial decrease in pollution levels, thereby supporting Porter’s hypothesis and relationship banking theory. Mechanism analysis indicates that local banks contribute to pollution mitigation by promoting innovation. Besides, the role of local banks in pollution reduction is more pronounced in cities with higher levels of foreign direct investment and economic development. Overall, our findings underscore the importance of supporting local banks in their green credit initiatives to achieve significant environmental benefits.
| Item ID: | 86048 |
|---|---|
| Item Type: | Article (Research - C1) |
| ISSN: | 1099-1158 |
| Copyright Information: | This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited. © 2025 The Author(s). International Journal of Finance & Economics published by John Wiley & Sons Ltd. |
| Date Deposited: | 07 Jul 2025 23:41 |
| FoR Codes: | 41 ENVIRONMENTAL SCIENCES > 4104 Environmental management > 410404 Environmental management @ 25% 41 ENVIRONMENTAL SCIENCES > 4105 Pollution and contamination > 410599 Pollution and contamination not elsewhere classified @ 25% 35 COMMERCE, MANAGEMENT, TOURISM AND SERVICES > 3502 Banking, finance and investment > 350201 Environment and climate finance @ 50% |
| SEO Codes: | 15 ECONOMIC FRAMEWORK > 1503 Management and productivity > 150302 Management @ 100% |
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