The Impact of Green Lending on Credit Risk in China

By Yujun Cui, Sean Geobey, O. Weber, Haiying Lin. Sustainability, 2018

223 citations recorded by the source corpus.

This study explores China’s green credit policy from a credit risk perspective. Green finance has been growing rapidly in China since the government issued its Green Credit Policy. The objective of this study is to explore whether green loans are less risky than non-green loans. Based on a five-year dataset of 24 Chinese banks, we used panel regression techniques, including two-stage least square regression analysis and random-effect panel regression to examine whether a higher green credit ratio reduces a bank’s non-performing loan ratio (NPL ratio). The results suggest that allocating more green loans to the total loan portfolio does reduce a bank’s NPL ratio. We conclude that institutional pressure by the Chinese Green Credit Policy has a positive effect on both the environmental and the financial performance of banks. The study contributes to the literature on the correlation between green lending and credit risks, as well as to the literature on the impact of institutional pressure on environmental and financial risks.

Subfields: Economics and Econometrics, Marketing, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/85cec5b12cae7d22b20de82b11098f1cbf0d6628

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

1. Gazi Salah Uddin
2. Ahmet Sensoy
3. Olivier Kraaijeveld
4. J. Smedt

In Strategy and Management

1. E. Tenakwah
2. David Adeabah
3. Isaac Akomea-Frimpong
4. Deborah Ofosu

Citations in the corpus

• Corporate social responsibility and bank financial performance in China: The moderating role of green credit (2021, unknown): “Based on the perspective of credit risk, Cui et al. (2018) discuss the impact of China's green credit policy.”
• A review of studies on green finance of banks, research gaps and future directions (2021, background): “Adopting green banking practices requires top management and employees to be committed to daily environment friendly operations (Cui et al. 2018).”
• Green credit policy and firm performance: What we learn from China (2021, background): “Therefore, green credit policy helps to adjust banks’ credit structure and reducing the risk of bank loans and social environment (King and Levine, 1993; Cui et al., 2018).”