This study assesses the impact of China’s Green Credit Guidelines (GCG) 2012 on the quality of firms’ green innovation and their financial asset allocations. While examining patent applications and grants, our findings reveal that, although the GCG 2012 led to a significant increase in green patent applications, its influence on granted patents, especially in the invention category, was minimal. This highlights a discrepancy between innovation intent and quality, suggesting that highpolluting enterprises (HPEs) prioritize rapid policy compliance rather than substantial environmental improvements. However, HPEs seem to prioritize liquidity over long-term financialization, potentially indicating enhanced credit allocation efficiency.

Using the formal implementation of the 2012 Green Credit Guidelines (GCG) as an exogenous shock to construct a quasi-natural experiment, we study the impact of green credit policies on the inefficient investment of heavily polluting firms in China's listed companies from 2008 to 2020. We find that green credit policies can significantly alleviate the inefficient investment of heavily polluting enterprises. By reducing agency costs and long-term liabilities, green credit policies mitigate the problem of inefficient investment in heavily polluting firms. Moreover, the mitigating effect of green credit policies on the inefficient investment of heavily polluting enterprises has significant heterogeneity in terms of property rights, internal characteristics.

Taking the prevalence of the global green development concept and China's green credit development practice as the background, this paper constructs a theoretical model analysis framework with the incentive policy of green credit as the entry point. First, the impact effect of green credit incentive policy is examined using the BVAR model. The results show that the green credit incentive policy suppresses the output level in the short run through the financing constraint channel, but has a positive contribution to output in the long run due to the adjustment of the production structure and the dynamic adjustment of green investment and R&D. Next, the paper constructs a DSGE model embedded with green credit fiscal and tax incentive policies, which explains the impact mechanisms and comparative effects of fiscal and financial policies driving green credit. The model shows that the re-guarantee policy is the most effective and consensual green credit incentive policy. In terms of the policy combination, the combination of the re-guarantee policy and the income tax policy is the current optimal policy pairing, and its policy is able to produce an amplification effect through the balance sheet channels of commercial banks and enterprises at the same time. In addition, a certain intensity of the above policy combination not only can effectively increase the scale of green credit, but also does not produce significant negative shocks to output and inflation. In summary, the findings of this paper provide a useful reference for the formulation and implementation of green credit incentive policies.

In the process of green transformation of China's economy, it is of great practical significance to study the impact of green finance in supporting the development of the real economy, especially the impact of green credit on enterprise innovation, in order to promote the green transformation of enterprises, industrial structure upgrading and sustainable economic development. This paper takes green credit as a perspective and introduces it into the analytical framework of the impact of environmental regulation on corporate green innovation, through theoretical mechanism analysis and empirical testing, in order to reveal the impact and mechanism of green credit on corporate green innovation. It is found that green credit can effectively promote green innovation in heavy polluting enterprises, and it is mainly reflected in the increase of green utility model patent applications with a low degree of inventiveness. The promotion effect of green credit on green innovation is more obvious in regions with lower levels of economic development. Further mechanism analysis shows that green credit policy promotes green innovation of heavy polluting enterprises mainly through the incentive effect brought by changing financing environment and the pressure effect brought by increasing market competition. The findings of this paper can provide references for policy-making departments, banks and enterprises.