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Green credit and bank’s risk-taking: evidence from China

Author

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  • Jianbo Song
  • Wencheng Cao
  • Yuan George Shan

Abstract

Purpose - This study uses data from the Chinese banking sector to explore the relationship between green credit and risk-taking in commercial banks. It also examines whether the level of regional green development acts as a moderator regarding this relationship. Design/methodology/approach - Using a dataset composed of annual observations from 57 Chinese commercial banks between 2008 and 2021, this study employs both piecewise and curvilinear models. Findings - Our results indicate that when the scale of green credit is low ( 0.164), it reduces the risk-taking of commercial banks. Moreover, this nonlinear relationship impact exhibits bank heterogeneity. Furthermore, the results show that the level of regional green development and local government policy support negatively moderate the relationship between green credit and commercial bank risk-taking. Furthermore, we find that green credit can directly enhance the net interest margin of commercial banks. Originality/value - This study is the first to provide evidence of a nonlinear relationship between green credit and risk-taking in commercial banks, and it identifies the significant roles of regional green development level and local government policy support in the Chinese context.

Suggested Citation

  • Jianbo Song & Wencheng Cao & Yuan George Shan, 2024. "Green credit and bank’s risk-taking: evidence from China," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 21(1), pages 157-184, July.
    • Handle: RePEc:eme:ijmfpp:ijmf-03-2024-0144
    DOI: 10.1108/IJMF-03-2024-0144
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    More about this item

    Keywords

    Green credit; Bank’s risk-taking; Nonlinear relationship; Green development; China; G21; G32; G38;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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