Heterogeneous Effects Of Green Credit On The Profitability Of Commercial Banks In My Country

Since the reform and opening up,China’s level of industrialization and urbanization has been rapidly improved,and it was considered as a remarkable economic miracle.However,the early extensive development model also caused serious damage to China’s ecological environment,resulting in huge social health costs.Although commercial banks do not directly participate in production,they can support and guide the development of China’s green industry by issuing green credit,which plays a key role in the steady operation of China’s green economy.In this case,this paper explores the impact of green credit on the profitability of commercial banks,whose main purpose of operation is to make profits,and provides a reference for them to achieve a win-win situation of environmental benefits and economic benefits.As green credit is still in the early stage of development in China,relevant academic research is not in-depth enough.Most of the existing domestic literature directly studies the samples of all commercial banks,and the conclusions are inconsistent: some scholars believe that green credit will have a positive impact on the performance of China’s commercial banks,while others come to the opposite conclusion.Only a few scholars have considered the possible heterogeneity of the influence of green credit on the performance of China’s commercial banks due to the different nature of commercial banks and the different intensity of green credit,but no scholars have considered the two possible heterogeneity at the same time.Existing literature only intuitively believes that green credit can improve the reputation level of commercial banks and thus have a positive effect on their performance,but few scholars have quantified the reputation level of commercial banks and conducted rigorous empirical analysis.In view of these deficiencies in the existing literature,this paper makes improvements in the empirical analysis,which is also the main marginal contribution of this paper.Before carrying out the empirical analysis,this paper firstly refers to the existing research and puts forward some approaches to the impact of green credit on the profitability of commercial banks through theoretical logic analysis,including both positive and negative approaches.Due to differences in the initial resource endowment of commercial Banks of different nature,the degree of understanding of loan customer information,and the formation process of green reputation,green credit may have different effects on the profitability of commercial Banks of different nature.At the same time,in the case of different green credit intensity,due to the different squeezing effect on the "high-pollution、high-energy-consumption and over-capacity" enterprise customers,and the possible change in the "quality" of green credit customers,when the green credit rate is low,green credit is more likely to show a positive impact on the profitability of commercial Banks.These analyses also show theoretically that the influence of green credit on the profitability of commercial Banks may be heterogeneous.This paper uses the financial data of 24 major listed commercial banks in China from 2013 to 2018 to construct a panel data model.Firstly,it found that green credit has significant positive influence on the level of profitability for country city commercial banks,and has significant negative effects for the "big six" state-owned commercial banks.On average,every 1% increase on the rate of green credit will lead to a 0.047% increase of return on total assets for city commercial banks and a 0.158% decrease of return on total assets for "big six" state-owned commercial banks.However,there is no significant difference for joint-stock commercial banks.In order to ensure the robustness of our basic research conclusions,this paper uses the first-order lag term of green credit rate to eliminate possible endogenous concerns,and changes the indicators to measure the level of profitability of commercial banks,all of which reach the same main conclusions.Then,this paper further explores whether green credit rate’s influence on our country commercial bank profitability is heterogeneous,using fixed effect panel threshold model.The result is consistent with theoretical analysis: green credit plays a better role in promoting profitability of commercial banks in China at a low rate of green credit.Finally,in order to test the mechanism of "green credit improves the profitability of commercial banks by improving their reputation",we first made a reasonable quantification of the reputation of commercial banks,and found that green credit can have the greatest positive and significant impact on the reputation of China’s city commercial banks.This paper reveals the heterogeneity of green credit on the profitability of China’s commercial banks and analyzes the reasons.These findings provide suggestions for commercial banks to better develop green credit related businesses,and also provide references for the formulation and optimization of green credit related policies of the government...