The Impact of Green Credit Policy on The Firms’ Green Strategy Choices: Green Innovation or Green-Washing?

Abstract Taking the green credit policy in 2012 as a quasi-natural experiment, this paper has investigated the impact of green credit policy on firms’ green strategy choices in China by using the panel data of the A-share firms listed from 2008 to 2019. The results reveal that green credit improves firms’ green innovation overall. In terms of time, listed firms’ green-washing can be significantly increased at the early stage of the implementation of green credit policy, but as time goes by, such green behavior of firms will be detected, which in turn will motivate firms to improve green innovation. Furthermore, the green credit policy has a more significant effect on the green innovation in firms in localities under high environmental regulation, economically developed regions, and without other alternative financing channels. Firms located in economically underdeveloped and low environmental regulation regions prefer to adopt the behavior of green-washing environmental information. Besides, green innovation by firms after the implementation of green credit can promote corporate financial, environmental, and social performance, while green-washing behavior will damage corporate financial, environmental, and social performance. Our findings contribute to the literature on green credit policy, corporate green innovation, environmental disclosure, and also provide some policy implications to improve the quality of green credit policy in the future.