Green Credit Policy, Environmental Investment, and Green Innovation: Quasi-Natural Experimental Evidence from China

In order to explore whether green credit policy can guide the green transformation of heavily polluting firms, we examine the influence of green credit policy on green innovation. Further, we analyze the mediating effect of environmental investment and the moderating effect of type of ownership and green finance development level in this relationship. Findings from the DID model indicate that the Green Credit Guidelines led to a significant increase in green innovation at heavily polluting enterprises, both quantitatively and qualitatively, with environmental investment acting as partial mediators. Further, the positive influence of green credit policy is more substantial in state-owned firms and in regions with high levels of green finance development. Findings are robust and remain valid after different sensitivity tests, including the improved PSM-DID model and the elimination of interference from some samples to address the sample selection bias existing in the DID model.