1. Introduction
Presently, China’s economic growth entered the stage of high-quality development. Given the urgent need for the coordinated advancement of China’s economy and environmental protection, green financing emerged as a significant driver in promoting sustainable economic development. In the national macro-control and economic development under the new regular, enterprise capital demand is also increasingly monumental. Financial means to achieve resource allocation became an indispensable part of guiding the flow of social capital to the sustainable development of enterprises, which became the government’s core objective. Green credit, a result of the advancement of green finance, seeks to direct credit resources towards green allocation. Its purpose is to assist enterprises in obtaining investment support from the capital market and accessing innovative capital. This, in turn, enables the establishment of low-carbon, recycling, and sustainable production structures and development models for enterprises. China’s fund investment has seen substantial expansion and is becoming a vital investment channel due to the rapid development of the financial market. Based on the most recent data published by the China Securities Investment Funds Association (CSIFA), as of the end of March 2024, China, as the world’s fourth-largest fund market, exceeded the 29 trillion Chinese Yuan (CNY) mark in terms of the size of its public funds. However, investors usually make capital market investments with a rational perspective. So, is the green credit policy effectively directing capital towards pertinent enterprises, and how are enterprises attracting investors’ attention and obtaining financial support through green finance?
The financial policy has long been an essential means of macro-control in China and an indispensable tool for fueling lasting business development [
1]. Strategically allocating financial resources [
2], it can facilitate the redirection of capital from environmentally harmful enterprises to sustainable, green enterprises [
3]. In February 2012, the former China Banking Regulatory Commission (CBRC) officially published the Guidelines for Green Credit (referred to as the “Guidelines” hereafter), indicating that China’s green credit program is progressing towards a standardized phase. The rules mandate that banking and financial institutions proactively advocate for environmentally friendly credit, enhance assistance for initiatives related to green, low-carbon, and circular economy, and reduce environmental and social risks. The goal is to optimize the credit system and drive industries’ eco-friendly transformation and progress. The Guidelines require banking and other financial institutions to establish the concept of green credit that is economical, environmentally friendly, and sustainable, and to pay attention to the role played by banking and other financial institutions in comprehensive, coordinated, and sustainable development [
4]. Implementing measures to regulate capital flow from financial institutions and optimize resource allocation for non-environmentally friendly businesses [
5] aims to facilitate their transition towards sustainable practices, promoting environmentally responsible and enduring societal progress. Green credit is a crucial tool in environmental regulation that helps promote green finance by directing the actions of the banking sector and supporting eco-friendly and sustainable social development [
6]. For non-green enterprises, enterprises through the green credit policy may subject them to various banking industry loan restrictions, making it challenging for enterprises to develop. However, by embracing green finance, enterprises can alleviate financial constraints, reduce resistance to enterprise transformation, and ultimately achieve long-term development [
7,
8]. The green credit policy plays a crucial role in directing and supporting the transition and improvement of firms’ environmentally friendly infrastructure. Can this policy attract support from investors? What are the specific differences in industry divisions? Through what mechanism of action? To address these issues, this study utilizes the introduction of the 2012 Green Credit Guidelines as a quasi-natural experiment. It selects Chinese A-share-listed enterprises as the research subjects and utilizes a difference-in-differences (DID) model to evaluate the impact of this green credit policy on fund investment.
Green credit policies attracted fund investors to enterprises by directing capital policy bias. Funds became an important force in the rise and fall of the capital market. Their investment conduct exerted a substantial influence on business development, receiving both positive and negative evaluations. On the one hand, fund investment follows the internationalised value assessment system, which is conducive to listed companies’ performance and competitiveness, as well as their longevity and market capitalization. On the other hand, the media repeatedly exposed incidents such as transfer of benefits and “rat trading”, which led to a negative impression of market speculators. So, are funds investing in the pursuit of value? Has the adoption of green credit policies enhanced the attractiveness of non-green credit-constrained sectors to investors?
In consideration of the aforementioned, this paper explores the significant influence of the green credit policies on investor participation. The primary contributions of this paper can be summarized as follows: (1) This paper analyzes the allure of the green credit policies for fund investors, shedding light on how enterprises can facilitate their transformation and upgrading within the framework of “dual-carbon”. While previous studies predominantly focused on the innovative effects of green credit, this analysis emphasizes the attractiveness of the green credit policies for fund investors. (2) By examining the impact mechanism of green credit on investment, this article argues that green credit alleviates enterprise financing constraints and enhances productivity, thereby promoting investment. It also suggests a development direction for further mitigating enterprise financing constraints. (3) The heterogeneity section emphasizes the promotional impact of the green credit policies on non-green industries, underscoring the crucial role that such policies play in nurturing long-term enterprise development.
The remaining structure of this paper is organized as follows: the second section presents the theoretical analysis and research hypotheses while also examining the current status and limitations of existing research; the third section outlines the establishment of econometric models and data sources; the fourth section conducts empirical tests to explore the relationship between green credit and investment, incorporating analysis from both heterogeneous perspectives and mechanisms; finally, the fifth section of the paper offers conclusions and presents policy recommendations.
2. Theoretical Analysis and Research Hypothesis
The green credit policy is crucial in directing the most efficient distribution of money for businesses to attain sustainable growth, a matter of great importance for the country’s future strategic posture. The investment of funds is closely linked to the future fluctuations of the capital market and will also significantly influence the future growth and progress of businesses. This paper aims to investigate the correlation between these two variables: whether the implementation of the green credit policy will garner support from fund investors and in what manner it will attract fund investment.
In terms of the implementation impact of the green credit policy, scholars primarily conduct research at two main levels. The first level is at the bank level, examining the influence of the green credit policy on its business performance. On one hand, Hu and Li [
9] argue that integrating green credit into the business strategy of commercial banks is beneficial for serving as a “loan supervisor”, enhancing banks’ competitiveness, and improving their profitability. Commercial banks promoting green credit will also enhance their social reputation, fostering more prudent decision-making behavior and bolstering their ability to withstand risks and maintain market competitiveness. On the other hand, certain scholars argue that there are notable disparities in the financial requirements of businesses, and that the market’s regulatory mechanism can effectively facilitate the allocation of credit resources to various industries and sectors. Therefore, just concentrating on the allocation of environmentally friendly loans would lead to an increase in banks’ operational costs, leading to a decline in operational effectiveness [
10].
Second, at the enterprise level, the impact of the green credit policy on enterprises is examined. Some studies focus on the impact of the green credit policy on corporate credit financing, as bank credit dominates the financing channels of Chinese firms. Thus bank credit also determines the intensity of corporate financing constraints. Green credit will raise the financing expenses for highly polluting companies, leading to a considerable decrease in the amount of funding they receive from banks. This reduction will particularly affect their ability to secure new bank loans and long-term debt financing, especially for those resource-based industries with high pollution and high energy consumption and industries with excess capacity. In addition, the green credit policy also contributes to the advancement of technological innovation in environmentally friendly enterprises [
11] and discourages technological innovation in high-pollution enterprises. Regarding the impact of the green credit policy on the green technological innovation of high-pollution enterprises, most scholars believe that it played a positive role in promoting such innovation [
12]. He and Tian [
13] found that implementing green credit policies can provide incentives for enterprises to participate in green technological innovation based on their research of Chinese enterprises.
Currently, there is yet to be a consensus on the conclusions of studies on investor behavior. Fund investment, which takes fund operation as its practice, pursues soundness and value investment by virtue of its information, capital, and professional advantages. Fund investors tend to have more information channels as well as professional analysis ability. Some current research on fund investment focuses on how to make fund choices based on corporate development. Based on the noise trader risk hypothesis [
14] and the consistency risk hypothesis [
15], fund investors reflect the rational demand of investors and the pursuit of long-term corporate value enhancement. However, some scholars believe that fund investors pursue short-term gains too much. Dupuy et al. [
16] showed that fund investors lack the patience to develop with listed companies and usually sell their shares before the value of the stock increases to develop the carry. Wiseman [
17] argued that fund investors, as mature investors, use the available information to predict the future growth of the enterprise. Xiang et al. [
18] find that funds have an information advantage and invest aggressively based on it. However, in the capital market, information asymmetry exists objectively, and fund investors are unable to grasp the real internal information of enterprises to make predictions [
19], and the national policy guidance becomes an important basis for fund investors’ investment decisions. However, there is no doubt that fund investors are considered to be high-end investors with stronger information purchasing and analyzing abilities than individual investors. Gong et al. [
20] argued that funds, as informed traders, can predict the future value of stocks to a certain extent. Fund investors may prefer companies with higher social responsibility performance.
In addition, some researchers and scholars also point out that fund investors can improve corporate social performance. Wu et al. [
21] show that in different economic environments, fund investment is likely to focus on using time-timing and stock-picking abilities, and investment strategies will change with economic fluctuations. As a result of transformation and upgrading, firms’ efforts in sustainable development will be exposed, recognized by society at large, and build up a good image [
22], making fund investors likely to prefer firms that transformed and upgraded under green credits.
In conclusion, comprehensive analysis is absent on the multifaceted impact of the green credit policies, particularly concerning fund investments. Commercial banks fulfill a pivotal function in optimizing the allocation of corporate resources under green credit, thereby alleviating enterprises’ financing difficulties. Fund investors in the capital market will also benefit from this opportunity. Consequently, we need to carefully examine and explore the crucial function of the green credit policy in the overall capital market. Practicing green credit policy can provide firms with excess returns from a long-term perspective [
23,
24]. Green finance will establish a beneficial external context for the growth of companies. The entry of investors can not only provide social capital for enterprises but also bring various invisible benefits, such as human connections and driving the improvement of total factor productivity. This ultimately culminates in an augmentation of the enterprise’s valuation [
25]. Furthermore, optimizing and upgrading of industrial structures can position enterprises as industry leaders over the long run. The financing situation of firms that engage in green development under the support of the green credit policy also reflects their operating conditions and capital strength [
26]. Enterprises with solid capital will attract fund investors’ attention, increasing investment preference for green credit enterprises. Based on this, this paper proposes the following hypothesis:
Hypothesis 1. Green credit policies help to attract fund investors into the business.
In China, during the transition period from 2003 to 2012, the banking system held a dominant position in China’s financial system, with bank credit being the primary source of funding for enterprises [
27], which determines the strength of enterprise financing constraints [
28]. Through the implementation of the green credit policy, enterprises can more efficiently access capital support. This is evident in the fact that corporate green credit not only reduces the information imbalance between enterprises and fund investors but also improves their ability to obtain capital, lowers the risk of default, and increases the willingness of fund investors to invest. The risk reduction hypothesis suggests that responsible behaviors such as corporate green credit can improve risk management and risk avoidance capabilities of enterprises and reduce the probability of corporate risks and that green credit policies can also significantly enhance the management of enterprise debt financing in both the short and long term [
29]. In addition, the green credit policy will create good external development conditions for enterprises and enhance their risk response ability. Cultivating a conducive external environment for enterprise development mitigates potential risks enterprises face, discourages short-term thinking, and strengthens enterprises’ resilience in risk management [
30]. However, the risk-increasing hypothesis suggests that corporate social responsibility deviates from the objective of maximizing shareholder value, and under the condition of limited corporate resources, excessive use of capital leads to insufficient investment in research and development, which reduces the competitiveness of the enterprise [
31], thus increasing the risk of the enterprise. Practicing green credit may lose the opportunity cost of economic effect enhancement in the short term due to increased social responsibility expenditure because of the transition. However, from a long-term perspective, it will allow the growth of corporate business credit, which not only broadens the channels of corporate financing, but also reduces the cost of corporate financing.
The entry of investors into the enterprise not only reduces the financing constraints for the enterprise, but also brings a series of invisible wealth for the enterprise, including human connections, and drives the improvement of total factor productivity, which ultimately manifests itself in the increase in enterprise value [
25]. Furthermore, the enhancement of the enterprise’s total factor productivity can lead to the optimization and upgrading of its industrial structure. Enterprises that carry out green development under the guidance of the green credit policy usually show better social responsibility, and enterprises with good social responsibility performance also reflect their business conditions and capital strength to a certain extent [
32], and enterprises with capital strength will be more willing to show their social responsibility, which may lead to an increase in investment preferences of investment institutions for green credit enterprises [
33]. Some researchers argued that enterprises’ strong development of green finance could effectively solve the problem of moral hazard and enhance the effectiveness of business administration while maximising the economic worth of firms. Some researchers and scholars also point out that institutional investors can enhance the performance of corporations in terms of social responsibility, Dhaliwal et al. [
34] highlighted that institutional investors holding a significant percentage of shares can compel companies to disclose comprehensive corporate social responsibility information and enhance their performance in social responsibility. Similarly, some researchers and scholars argue that corporate social responsibility may reduce the value of institutional investors and affect their returns, making such investors to motivate firms to perform less social responsibility and reduce social performance. In fact, the productivity effects of the green credit policies and the alleviation of financing constraints are mutually reinforcing [
35]. The implementation of the green credit policy will ease financing constraints for enterprises, allowing them to allocate sufficient capital to enhance productivity development further. As a result, the improved business performance and increased productivity achieved through green credit will be recognized by external media and the capital market, leading to more significant investment in enterprises and ultimately reducing their financing constraints.
Hypothesis 2. Green credit attracts fund investors into firms by alleviating financing constraints and improving business performance.
3. Empirical Design
3.1. Data Sources
This study investigates the influence of the green credit policy on the participation of institutional investors, utilizing panel data from Chinese A-share-listed companies in Shanghai and Shenzhen between 2004 and 2020. The fund investor data come from China Stock Market & Accounting Research (CSMAR) databases, which matches the “fund subject information table” with the “stock investment detail table” in the fund market series to obtain the detailed table of funds investing in listed companies, and based on which the market value and the number of shares held by the enterprise contained by fund institutional investors are counted. On the basis of this, the market value and number of shares held by fund institutional investors in the enterprise in the same year are counted. The remaining variables in this paper are sourced from the CSMAR database. In order to ensure the robustness of the empirical results, this paper treats the relevant data as follows: (1) excluding the samples of financial listed companies; (2) excluding the samples of property listed companies; (3) excluding the samples of special treatment (ST and *ST)-listed companies. Enterprises with special treatment are those that are inconsistent with the actual situation of the enterprise and have abnormal financial systems (continuous losses and financial abnormalities).
3.2. Modelling
Based on the double difference method, this paper constructs the following regression model to test the attraction effect of green credit on fund investors:
where the subscripts
and
represent firms and years, respectively; the explanatory variables
denote fund investment, using the presence or absence of fund investor shareholding market value (
) and the number of shares held by fund investors (
); the core explanatory variable
represents green credit policy;
Where is the green credit policy time dummy variable, this paper takes the Green Credit Guidelines formulated by the former CBRC in 2012 as the entry point, and takes the value of 0 before the implementation of the policy in 2012, and takes the value of 1 after the implementation of the policy in 2012.
Where is the industry dummy variables, according to the Guidelines on Industry Classification of Listed Companies (revised in 2012) issued by the China Securities Regulatory Commission and the Guidelines on Environmental Information Disclosure of Listed Companies (Draft for Public Comments) issued by the Ministry of Environmental Protection of the People’s Republic of China in September 2010, it defines thermal power, iron and steel, cement, electrolytic aluminium, coal, metallurgy, chemical industry, petrochemical industry, building materials, paper manufacturing, brewing, pharmaceutical industry, fermentation industry, and textile industry. The paper selects the above industries as the heavy polluting industries. In this paper, the above heavy polluting industries are selected as green credit-restricted industries, and non-heavy polluting industries are non-green credit-restricted industries; meanwhile, green credit-restricted industries are set as the control group and non-green credit-restricted industries are set as the experimental group.
The interaction term examined is the effect on the entry of fund investors in green credit-restricted industries and non-green credit-restricted industries before and after the implementation of the Guidelines. If is significantly greater than 0, it indicates that the Guidelines significantly promote investor entry in non-green credit-restricted sectors, and vice versa, it indicates no significant promotion.
is a set of control variables; are individual fixed effects, the are year fixed effects, and is a random error term. In addition, this paper provides a cluster of robust standard errors in the industry year dimension.
3.3. Data Characteristic
The model variables are set as follows:
- (1)
Explained variable: fund investment. This paper uses the market value of fund investors’ shareholding (GImv) and the number of fund investors’ shareholding (GIsnum) in the current year of the firm to characterize them.
- (2)
Core explanatory variables: . This paper explores the attraction effect on fund investors using the Green Credit Guidelines formulated by the former CBRC in 2012 as the policy point in time.
- (3)
Other control variables: In this paper, asset–liability ratio (Lev), total asset turnover (ATO), proportion of independent directors (Indep), proportion of institutional investors’ shareholding (INST), size of supervisory board (JP), retained earnings (Rep), undistributed profit per share (Cpp), proportion of other receivables to total assets (Occupy), and degree of equity checks and balances (Balance), etc., are used as control variables.
Table 1 and
Table 2 show the definitions of the main variables and their descriptive statistics, respectively.
5. Conclusions and Enlightenment
Investing in funds is a crucial component of the capital market that aids in the long-term growth and stability of the economy; how to guide the injection of social capital into environmental protection enterprises and build China’s green financial system is of great significance. As a significant environmental regulatory tool, the green credit policy aims to steer the transformation of economic development patterns and enterprise restructuring through the efficient allocation of credit resources, thereby better serving the real economy. Enterprises, as the microscopic subjects carrying economic development, how to carry out transformation and upgrading in the current environmental protection background not only exerts a significant influence on the future growth and advancement of businesses but also contributes to the high-quality development of the national economy. So, what is the impact of corporate green credit policy on fund investors’ investment behavior? What are the channels through which the influence of the green credit policy on fund investors’ investment behavior can be achieved? Based on the panel data of Chinese Shanghai and Shenzhen A-share-listed companies from 2004 to 2020, this paper examines the impact of the green credit policy on the entry of fund institutional investors. It is found that green credit policy significantly promotes the increase in fund investment, and green credit policy in non-state-owned enterprises, small and micro-enterprises, and non-green enterprises, the policy is more significant for the increase in investment, and the green credit policy attracts investors to enter through the financing constraints effect as well as the productivity effect path.
This paper holds significant theoretical implications. A comprehensive review and analysis of the existing literature reveal that the majority of scholarly research on green credit demonstrates a certain level of concentration, primarily focusing on endogenous factors within enterprises while lacking in-depth exploration of exogenous factors influenced by green credit policy. This paper takes the policy time period as an entry point to further study the impact of green credit policy on the entry of fund institutional investors, which shows that green credit policy helps to attract fund investors to enter the enterprise. This enriches and deepens findings in green innovation research, expands the factors influencing fund investment and the scope of research on green credit policies, and contributes to the integration of green resources, promotion of enterprise’s green transformation, and realization of harmony between humanity and nature.
This paper holds significant practical implications, as the study’s findings can offer valuable insights and recommendations for advancing green credit at both macroeconomic and microeconomic levels in the country. The green credit policy, an integral component of sustainable finance, plays a pivotal role in the nation’s environmental conservation efforts. This paper is instrumental in providing guidance for the country to implement the green transformation of enterprises. The investment in funds plays a crucial role in the capital market, contributing to the sustainable development of the economy. This paper serves as a valuable guide for directing fund investments towards environmental protection enterprises. The research in this paper advocates for the promotion of green transformation and upgrading of enterprises, aiming to achieve a more efficient and environmentally friendly mode of economic development, thereby realizing the goal of sustainable development.
The research findings have substantial theoretical and practical consequences for implementing green finance regulations, ensuring high-quality business growth, and the sustainable progress of society. Based on the above findings, this paper’s conclusions can provide important insights.
First, the guiding role of the green credit policies needs to be further strengthened. The government should persist in implementing and enhancing the green credit policy, ensuring its sustained effectiveness in supporting the continued development of enterprises. In addition, the government should further increase green credit subsidies for enterprises and strengthen information sharing between banks and enterprises so that enterprises have sufficient capital to achieve transformation and upgrading. Furthermore, it is imperative to enhance the capital market system, proactively regulate and direct investors’ investing behavior, and channel investments towards firms that urgently require financial support. As the main body of the implementation of the green credit policy, the effective implementation of the banking industry is related to the effectiveness of the green credit policy. In the study of this paper, green credit policy can alleviate enterprise financing constraints. We should pay attention to the credit support role of the banking sector in green credit policy and improve the support and guidance role of the banking sector to non-green enterprises in green credit so that the banking sector can provide financing support in the green transformation of enterprises and expand the policy effect of green credit.
Second, differentiated policies are based on the heterogeneity of enterprises. Focus on the development status of non-state-owned enterprises, small and microenterprises, and non-green industries in the course of undergoing transformation. During the process of enterprise transformation and upgrading, non-state-owned enterprises, compared with state-owned enterprises, due to the different nature of the property rights of capital, the investment is a more robust component, their transformation and upgrading will be more prudent, itself due to the fact that the difference in the amount of capital will have a variety of problems; for small and micro-enterprises themselves, in the scale of difference with the large enterprises, the financial troubles significantly impede the reform and upgrading of the company, hence hindering its development; for non-green enterprises, along with the intensification of the pollution problem, under the pressure of the country to increase efforts for environmental remediation, the survival of non-green enterprises is a predicament. In the future, it is necessary to provide targeted green credit policies for non-state-owned enterprises, small and micro-enterprises, and non-green industries. This could include government subsidies for the enterprises to support their green transformation, as well as strengthened management guarantees. It is recommended that the enterprises seek financing guarantees from government guarantee companies. Risk mitigation measures such as local government credit guarantee funds, bank–government guarantee cooperation, and credit insurance should be actively explored.
Thirdly, enterprises should establish a sense of sustainable development and formulate reasonable policies to facilitate the advancement and enhancement of businesses. Small and medium-sized enterprises, especially those in non-green industries, should use the policy advantages brought about by the green credit policy to force enterprises to transform and upgrade themselves, take on social responsibility, and realize the development of economic and social benefits in a unified manner. Enterprises should focus on their low-carbon energy-saving transformation and upgrading, use government policies to achieve industrial greening and energy saving, improve corporate reputation, release positive signals to the outside world, guide all sectors of society to focus on green governance, green investment, improve the environmental performance of investment activities, enhance the enterprise’s innovation vitality, and improve business performance in order to maximize the attractiveness of green credit to investors and enable enterprises to dominate in the increasingly fierce competition, thus realizing the long-term development of enterprises.
This study has certain limitations and requires further investigation in the future. This paper utilizes the Green Credit Guidelines, widely adopted in academic circles, as a starting point to examine the impact of green credit policies on fund investment. However, besides green credit, the government also introduced other relevant policies. In future research, a continuous double difference model can be constructed to analyze the effects of green credit policy, and the influence on fund investor participation can be further explored in light of multiple policy shocks.