Does government dual-target management affect local bank credit structure? Evidence from China

This study empirically examines the impact of government dual-target management of economic growth and environmental constraints on bank credit structure, by taking 231 local commercial banks in China from 2008 to 2022 as the sample. It was found that although economic growth target increases the similarity of bank loans’ industrial structure, the introduction of environmental constraint target significantly weakens this impact. Mechanism analysis suggests that the implicit guarantee role of the government and intensifying competition among banks are important influencing mechanisms. Furthermore, the effect exhibits heterogeneity due to differences in economic cycles, city development levels, and bank capital adequacy ratios. The findings have important implications for government target setting and management, as well as for preventing banking financial risks. • This study investigates the impact of China's local government dual-target management on bank credit structure. • Economic growth target increases the similarity of bank loans' industrial structure. • Environmental constraint target weakens the impact of economic growth target on bank credit structure. • The implicit guarantee role of local governments and competition among commercial banks are important mechanisms.