AUTHOR=Yang Shuangquan 

TITLE=Green credit and corporate environmental violations: evidence from regulatory arbitrage in China

JOURNAL=Frontiers in Climate

VOLUME=Volume 7 - 2025

YEAR=2025

URL=https://www.frontiersin.org/journals/climate/articles/10.3389/fclim.2025.1643192

DOI=10.3389/fclim.2025.1643192

ISSN=2624-9553

ABSTRACT=IntroductionWe test whether identity-based green credit improves or worsens firms' environmental compliance under discretionary enforcement.MethodsUsing a firm-year panel of 2,376 listed firms, we link banks' green-credit status to environmental penalty records and estimate fixed-effects models aided by a shift-share instrument, alongside extensive falsification and robustness checks.ResultsRelative to comparable firms, green-credit recipients are 19.7% more likely to receive environmental penalties, with stronger effects among privately owned firms; greater enforcement standardization attenuates this pattern.DiscussionIdentity-based green credit can backfire under discretionary enforcement; performance-based eligibility and more standardized enforcement can mitigate the risk.