Green credit, green reputation, and corporate financial performance: evidence from China

Abstract

The article combines green credit and the performance of listed banks in a theoretical and empirical analysis to explore the intrinsic correlation between the two and find the intrinsic motivation for banks to implement green credit. The article first reviews the current status of green credit research and theories related to green development in China and other countries and then analyzes the dynamics of green credit development and value creation, as well as the mechanisms by which green credit improves the financial performance of listed banks. Finally, the article explores the impact of green credit on the financial performance of listed banks through empirical analysis. Through a panel data model, this paper analyzes data related to 19 listed banks in China from 2008 to 2017 to investigate the impact of green credit on the financial performance of listed banks. This study has shown that the green credit ratio, as an indicator of the amount of green credit implemented by listed banks, will positively impact financial performance. But the impact of the current period and the one-period lag is more significant, while the effect of the two-period lag is not significant. The second major finding was that when green reputation is used as an indicator to measure the quality of green credit implementation of listed banks, listed banks’ financial performance can be significantly improved. Besides, this study has also found that green credit implementation generally has different impacts on different types of banks.