Green credit policy and its friction: Evidence from corporate asset structure adjustments

This study investigates the challenges influencing the effectiveness of green credit policy, with a focus on corporate asset structure adjustments. Our findings reveal that the green credit policy significantly decelerates the adjustment speed of asset structure in heavily polluting firms, which indicates a substantial inhibitory effect of green credit policy on the asset allocation efficiency. Furthermore, the green credit policy does lead to a reduction in pollution emissions, while the sluggish adjustment speed of corporate asset structure hampers its effectiveness in emission reduction. Mechanism analysis suggests that the inhibitory effect of green credit policy on the dynamic adjustment of corporate asset structure is primarily attributed to both the lack of adjustment opportunity and adjustment motivation. Additionally, heterogeneity analysis indicates that this inhibitory effect is more prominent in state-owned enterprises, firms located in regions with higher financial development levels and more stringent environmental regulations. This study advances the green finance and asset allocation efficiency literature by examining the impact of green credit policy on the dynamic adjustment of corporate asset structure. It highlights the policy’s unintended friction in heavily polluting firms, demonstrating that while green credit policies reduce pollution, they hinder the efficiency of asset structure adjustments. Overall, this study offers practical implications for policymakers seeking to design balanced strategies that harmonize environmental objectives with corporate financial sustainability.