The Impact of Green Finance Policy on Environmental Performance: Evidence from China

We investigate whether and how the policy of establishing green finance pilot zones affects corporate environmental performance in China, by employing the DID model and taking 2324 Chinese A-share listed companies as the empirical sample. The main findings show that the green finance policy can significantly improve corporate environmental performance in the green finance pilot zones. The policy effect varies according to enterprise ownership, sector, and degree of environmental supervision. In particular, compared with private enterprises and enterprises subject to key pollution monitoring, the environmental performance of state-owned firms and non-key pollution-monitored firms is more positively affected by the green finance policy. Through a mechanism analysis, we find that corporate innovation and financial constraints can play partially mediating roles in the linkage of green finance policy and corporate environmental performance. Among them, the mediating effects of green innovation and financial constraints are more prominent in private enterprises and key pollution-monitored enterprises. However, although the green finance policy can positively influence bank loans obtained by enterprises, there is no evidence to suggest that bank credit plays a significant mediating role between the green finance policy and corporate environmental performance. Our findings are helpful for understanding the effect of green finance policy on environmental sustainability and could provide some references for policymakers. In particular, we suggest that private and key pollution-monitored enterprises should actively respond to the green finance policy, broaden financing channels, and enhance capability of green innovation, thereby improving their environmental performance.