The effect of the policy mix of green credit and government subsidy on environmental innovation
Accepted version
Peer-reviewed
Repository URI
Repository DOI
Change log
Authors
Abstract
We examine to what extent ‘policy mix’ of green credit policy and government subsidy affects high-quality environmental innovation of high-polluting firms. The green credit policy is a special environmental regulation that guides the distribution of credit from banks. Using the difference-in-difference method, we find that Green Credit Guidelines (GCGs) have a negative impact on the high-quality environmental innovation of high-polluting firms in China. However, the negative relationship between GCGs and high-quality environmental innovation depends on the level of government subsidy. Subsidies can effectively correct the negative impact of GCGs. The mechanism analysis shows that GCGs hinder high-quality environmental innovation through two channels: (1) increase in compliance costs and (2) lack of long-term bank credit that supports environmental innovation. Government subsidies can play a moderating role in the second channel.