Purpose Green credit has emerged as a crucial economic tool for achieving a green and low-carbon transition. However, the relationship between green credit and bank credit risk, particularly in China, remains underexplored. In this regard, this study investigates how green credit balance (GCB) exacerbates the non-performing loan ratio (NPLR) in Chinese commercial banks. Design/methodology/approach Based on the data of 30 listed commercial banks (6 state-owned large commercial banks, 11 joint-stock commercial banks, 10 urban commercial banks and 3 rural commercial banks) in China from 2012 to 2022, this study constructs two-way fixed regression model, threshold effect model, and moderating effect model to investigate the non-linear correlation between green credit and commercial bank credit risk and its influence mechanism. Findings The study finds: (1) There is a substantial inverted U-shaped relationship between GCB and NPLR, and China is currently in the rising stage of NPLR. (2) The leverage ratio of the bank (LEV) plays a significant double-threshold effect. As the LEV escalates, the amplifying impact of GCB on NPLR exhibits a dynamic progression, characterized by an initial surge in potency, culminating in a gradual attenuation over time. (3) The M2 growth ratio (M2R) plays an important moderating effect. When M2R increases, the inverted U-shaped effect of GCB on NPLR is weakened, and the volatility of NPLR is reduced. (4) Banks with larger assets and higher profitability are more effective in managing the credit risk of green loans. Practical implications We make the following policy recommendations: (1) Commercial banks should continue to smoothly expand the scale of green credit, actively optimize their asset-liability structure, and strengthen industry cooperation. (2) The central bank should play the role of macro-control and make timely adjustments to the money supply. (3) Financial regulators should play a supervisory function to ensure that banks operate in compliance and avoid systemic risks. Originality/value The marginal contributions of this study mainly include: (1) This study collected and collated the data of 30 listed commercial banks in China and updated the research time to 2022, which solved the limitations of previous studies such as older sample years, unupdated data and insufficient consideration of bank stock types. (2) This study breaks through the traditional research on the linear impact of green credit, innovatively constructs a bidirectional fixed model with quadratic terms, and finds that there is a significant inverted U-shaped relationship between green credit and credit risk. This exploration has greatly changed the risk management strategy of banks. (3) This study is not limited to elaborating on the development of green credit from a theoretical perspective, but further explores the influence mechanism between the two using econometric models to provide a reference for other relevant empirical evidence on green finance.
Zhou et al. (Tue,) studied this question.
Synapse has enriched 5 closely related papers on similar clinical questions. Consider them for comparative context: