Does green credit policy mitigate financialization? Evidence from Chinese heavily polluting enterprises.

Green credit policy is an important tool to use financial credit resources to stimulate heavily polluting enterprises to change their production methods. This paper constructs a difference-in-differences model based on the quasi-natural experiment of the green credit policy promulgated in 2007 to explore the impact of environmental regulation on the financialization of heavily polluting enterprises and its mechanism. The empirical results show that the green credit policy significantly inhibits the financialization of heavily polluting enterprises, especially for speculative financial assets. This inhibitory effect is more significant in non-state-owned enterprises, enterprises with severe financing constraints, highly competitive industries, and the eastern region. Furthermore, we find that the green credit policy inhibits the financialization of heavily polluting firms by promoting green innovation, mitigating agency problem, and improving media supervision. At the same time, the 2012 Green Credit Guidelines still have an inhibitory effect on the financialization of heavily polluting enterprises from 2009 to 2019, reflecting that China's green credit policy system has a continuous guiding role in the rational allocation of financial assets of heavily polluting enterprises.