Green Credit Guidelines and financial resilience:implications for green innovation in heavily polluting enterprises

This paper examines the impact of China’s 2012 Green Credit Guidelines (GCG) on the green technological innovation of heavily polluting enterprises (HPEs). Using a panel dataset of 491 listed companies from 2009 to 2018, the study employs a Matched Difference-in-Differences (DID) model to analyse the policy’s effects, complemented by Triple and Quantile DID models to explore underlying mechanisms. The results indicate that, contrary to expectations, the GCG negatively impacts green innovation among HPEs, particularly affecting private, smaller-scale, financially constrained, and low-profit firms in highly competitive markets. However, the adverse effect is short-term, with firms that have greater financial resilience, access to subsidies, stronger initial green innovation capabilities, and market power better able to withstand financial restrictions. The findings highlight the need for more tailored green credit policies that consider firm-specific characteristics to effectively promote green innovation.