The synergistic impact of green credit policy and government subsidies on green innovation of heavily polluting firms

This study examines the effects of green credit policy and its synergy with government subsidies on green innovation in heavily polluting firms, utilizing data from Chinese A-share listed companies between 2007 and 2023. The results show that while green credit policy promotes strategic green innovation in heavily polluting firms, it fails to promote substantive green innovation. The synergy between green credit policy and government subsidies effectively fosters substantive green innovation. The results of the mechanism analysis indicate that the green credit policy increases non-innovative environmental investments and exacerbates bank credit discrimination. These effects jointly crowd out substantive green innovation in heavily polluting firms. In contrast, the synergy between green credit policy and government subsidies helps curb non-innovative investments and alleviates credit discrimination, thereby fostering substantive green innovation. Heterogeneity analysis suggests that stronger intellectual property protection and stricter environmental regulation can enhance the positive impact of green credit policy. This study suggests that enhancing the quality of green innovation and achieving green transformation in heavily polluting firms necessitate synergistic coordination of policy tools.