The impacts of green credit guidelines on total factor productivity of heavy-polluting enterprises: A quasi-natural experiment from China

Whether tightening environmental regulations would enhance corporate productivity gains is still in question. This paper takes China’s green credit guidelines (GCGs) as a quasi-natural experiment to test the effects of environmental regulations on total factor productivity (TFP) growth of heavy-polluting companies. A Malmquist index based on adjusted epsilon-based measure (EBM) is constructed to estimate corporate TFP. In addition, a propensity score matching-difference in difference (PSM-DID) approach is utilized to evaluate the impacts of such policy on enterprises’ TFP followed by impact mechanism analysis. Empirical tests based on of Chinese listed heavy-polluting enterprises during 2007–2019 demonstrate that: (1) GCGs policy contributes remarkably to productivity gains of the heavy-polluting enterprises; (2) the positive effects of GCGs on TFP of the enterprises are mainly introduced by the improvement of technical innovation and allocation effect; (3) GCGs may restrain the increase of TFP of heavy-polluting enterprises through the financial constraints of bank credit and commercial credit; (4) it is unclear if GCGs contributes to productivity gains through improved management efficiency. Corresponding suggestions for the government, firms, and public are then proposed to facilitate the perfection of green finance policies as well as high-quality development of heavy-polluting firms based on the research findings.