ABSTRACT
Environmental issues are a global challenge. In bank-centric financial systems such as China’s, the impact of long-term credit on sustainable development is a crucial yet underexplored issue. We use a plausibly exogenous long-term credit policy (LCP) implemented in 2019 to identify the impact of long-term credit on green innovations. Using a difference-in-differences (DID) approach, we find that long-term credit increases firms’ low-quality green innovations by optimizing credit term structures and generates spillover effects on environmental performance. Moreover, long-term credit significantly enhances high-quality green innovation in regions with more stringent environmental disclosure regulations. These findings reveal a quantity-over-quality effect of long-term credit on green innovation and highlight the critical role of integrating financial and environmental policies.
Disclosure statement
No potential conflict of interest was reported by the author(s).
Data availability statement
The data that support the findings of this study are openly available: doi:10.7910/DVN/P8ETC8.
Notes
1 Data are from People’s Bank of China.