This study examines how green credit policies (GCP) influence corporate social responsibility (CSR) in pollution-intensive firms in China, using China’s 2012 “Green Credit Guidelines” as a quasi-natural experiment. Through a difference-in-differences (DID) model analyzing 3627 publicly listed Chinese companies from 2010 to 2020, we identify key challenges in aligning financial incentives with environmental goals. Our findings reveal that financial constraints and differences in total factor productivity (TFP) may limit the effectiveness of GCP in promoting CSR initiatives among highly polluting firms. However, this inhibitory effect decreases once TFP surpasses a threshold, suggesting that greater productivity can mitigate these disincentives. Interestingly, we find that GCP have a negative impact on CSR in highly polluting firms, underscoring the need for more refined green credit policies to encourage sustainable corporate practices. These insights have significant implications for transition economies facing similar environmental challenges and contribute to broader global sustainability strategies.
Wei et al. (Wed,) studied this question.