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Green Loans and Green Innovations: Evidence from China’s Equator Principles Banks

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  • Xijia Huang

    (Tourism Research Institute, Nanchang University, Nanchang 330031, China
    School of Tourism, Nanchang University, Nanchang 330031, China)

  • Yiting Guo

    (School of Tourism, Nanchang University, Nanchang 330031, China)

  • Yuming Lin

    (School of Finance, Guangdong University of Foreign Studies, Guangzhou 510420, China)

  • Liping Liu

    (School of Tourism, Nanchang University, Nanchang 330031, China)

  • Kai Yan

    (School of Tourism, Nanchang University, Nanchang 330031, China
    School of Management, Nanchang University, Nanchang 330031, China)

Abstract

Green innovation is critical for promoting environmental protection but largely relies on the support of bank financing. How the participation of banks facilitates green innovation remains largely unexplored. Using a sample of A-share listed firms in China, this study examines the impact of new loans from Equator Principles banks on green innovations. Consistent with the framework of the stakeholder theory, we find that new loans from Equator Principles banks significantly foster green innovations of borrowing firms. Several robustness tests are conducted, and the conclusion remains valid. Further analysis shows that the relief of financial constraints of borrowing firms and the scrutiny of corporate financing projects by Equator Principles banks jointly contribute to the promotion of corporate green innovation. Heterogeneity tests indicate that new loans from Equator Principles banks are more effective in heavily polluting and more competitive industries and among firms with higher levels of executive education. Overall, our findings suggest that stakeholder engagement in environmental governance is an important means of improving corporate green innovations in emerging markets.

Suggested Citation

  • Xijia Huang & Yiting Guo & Yuming Lin & Liping Liu & Kai Yan, 2022. "Green Loans and Green Innovations: Evidence from China’s Equator Principles Banks," Sustainability, MDPI, vol. 14(20), pages 1-20, October.
    • Handle: RePEc:gam:jsusta:v:14:y:2022:i:20:p:13674-:d:949890
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