The Impact of Green Credit Ratio on Return on Assets

How does the green credit ratio affect a bank return on assets? This study uses panel data from 2012 to 2019, covering 18 large banks in China, including 6 state-owned banks and major 12 important joint-stock and city commercial banks. I use regression models to measure the effect of the green credit ratio (GCR) on return on assets (ROA) and return on equity (ROE), and we focus on how bank ownership and fixed effects matters. The results show that the effect of green credit ratio (GCR) on ROA depends on the model design. When bank fixed effects are included, green credit ratio (GCR) does not have a clear effect on ROA. But when fixed effects are not included, green credit ratio (GCR) has a positive and significant effect on ROA, especially in state-owned banks. On the other hand, green credit ratio (GCR) does not have a clear effect on ROE. These results suggest that green credit may not always help short-term profits, and future research should look at long-term effects.