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Green credit efficiency of commercial banks in China: Evidence from a multi-period leader-follower model with preference

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  • Li, Jingyu
  • Guo, Xiangyuan
  • Xie, Qiwei
  • Sun, Xiaolei

Abstract

The efficiency of green credit in commercial banks is important for promoting green economic development. But seldom studies have investigated the efficiency evaluation of banking green credit activities. To fill this gap, this paper proposes a model for assessing the efficiency of green credit and further investigates the factors that potentially affect the efficiencies. The evaluation model for green credit efficiency is built through a multi-period leader-follower framework by innovatively considering green credit as an inherent input-output indicator with preference. The results demonstrate that the green credit efficiency of the Chinese commercial banks in the profit earning stage generally surpasses that in the deposit conversion stage. Throughout the multi-period analysis, the majority of banks, especially those that are state-owned, have improved their deposit conversion efficiency from 2017 to 2021. The efficiency in the profit earning stage for all banks significantly declined due to the impact of COVID-19. Bank size, asset quality, and macroeconomic conditions have significant influences on green credit efficiency. However, their influences vary heterogeneously across different stages and types of banks.

Suggested Citation

  • Li, Jingyu & Guo, Xiangyuan & Xie, Qiwei & Sun, Xiaolei, 2024. "Green credit efficiency of commercial banks in China: Evidence from a multi-period leader-follower model with preference," International Review of Financial Analysis, Elsevier, vol. 96(PA).
    • Handle: RePEc:eee:finana:v:96:y:2024:i:pa:s1057521924005362
    DOI: 10.1016/j.irfa.2024.103604
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