The Research On Green-Credit, Green Reputation And Financial Performance Of Commercial Banks

With the promotion of green economy and sustainable development, greenrevolution spread rapidly. Green credit policy has become essential to thedevelopment trend of the financial sector. The development of green credit incommercial banks is the necessary requirement of environmental protection, but alsothe opportunity of the long-term sustainable development of banks. Whether greencredit policy could be effective depends on the decisions of banks.The paper analyzes the benefits and losses of the subjects of green credit, andusing game equilibrium analytical methods studies green credit theory. It points outthat financial support is very important to tackle environmental and natural resourcesproblems. Basing on game between commercial banks and enterprises, the paperanalyzes the certain condition that banks imply green credit on the condition thatgovernment has issued the policies of environmental economy. The outcomesdemonstrate that whether banks would make a decision to reach a binding agreementdepends on customer value of commercial banks’ loan enterprises.Then, the paper analyzes the customer value of commercial banks’ loanenterprises and the mechanism that setting up green reputation and creating value. Itpoints out that the current value of high pollution and high energy-consumingenterprises is higher than energy conservation and environmental protectionenterprises. Whether green credit policy could improve financial performance ofbanks depends on the potential value of energy conservation and environmentalprotection enterprises.Finally, basing on social impact hypothesis, good management theory andstakeholder contract costs theory, the paper puts forward the hypothesis that if thebank implies green credit, it will improve relations with stakeholders, and thanimprove financial performance of the bank. Using the data from27Chinesecommercial banks from2007to2010the paper exams the relationship between greenreputation and financial performance of the banks. Empirical analysis shows thatgreen reputation has positive correlation with financial performance of banks. So theimplement of green credit can not only improve social performance, but also improvefinancial performance of banks. Banks’ rational choices must be implying green creditintentionally.The paper examines whether green reputation affects financial performance ofbanks, and it highlights the importance of media coverage to set up green reputationof commercial banks. These are main contributions of this paper.