The Impact Of Green Credit On The Profitability Of Commercial Banks

With the rapid economic development of our country,environmental pollution has become more and more serious,and the ecological environment has been seriously damaged.With the improvement of living standards,people gradually realize that protecting the environment is of great importance.In order to solve the problems of high energy consumption,high emissions and high pollution,China should develop green finance and promote to upgrade economic structure,so as to realize the sustainable development of economy.Commercial banks are the core of China's financial system.They play a vital role in developing green economy,optimizing the allocation of resources and improving the ecological environment.In this context,the government has issued a series of green policy documents to guide financial institutions to carry out relevant business,and green credit emerged as the times require.Green credit of China has entered the stage of comprehensive development,and the scale of green credit is expanding.Commercial banks are profit-oriented enterprises.Only when they carry out green credit business to improve their profitability level can they have the motivation to implement green credit.Whether green credit is compatible with profitability of banks is an urgent question to be answered.Different ownership banks may face different trends of green credit.Whether there are differences in the impact of green credit on profitability among different types of commercial banks is also worth discussing.In theory,the impact of green credit on the profitability of commercial banks is twofold: on the one hand,developing green credit will increase the cost of bank management.Commercial banks need to set up special green credit departments and personnel to carry out green credit business,which will increase the operating costs of banks."Two high and one surplus" industry loans are an important source of bank profits.The green credit business of banks means the restriction of loans to "two high and one surplus" industries,which will reduce the economic benefits of commercial banks;on the other hand,developing green credit helps to reduce the credit risk of banks,promote the innovation of financial instruments,improve the social reputation and international competitiveness of banks,so as to improve the economic benefits of commercial banks.We can see that the impact of green credit business on the profitability of commercial banks is not clear based on these two aspects.The development of green credit affects the progress and effectiveness of green transformation of our economy.Therefore,it is necessary to test the impact of green credit on the profitability of commercial banks through empirical analysis,and further explore the relationship between the two by distinguishing bank ownership.It is of great significance to implement green credit related measures and realize the transformation and upgrading of economic structure.This paper takes the impact of green credit on the profitability of commercial banks as the research object.Firstly,it expounds the connotation of green credit and the theoretical basis of implementing green credit.Secondly,it analyses the concept and influencing factors of commercial banks' profitability,and puts forward research hypothesis based on relevant theoretical analysis.Then,select the appropriate indicators,collect data and use STATA for empirical analysis.Through manual collation of relevant data such as annual reports and social responsibility reports of banks,this paper finally uses panel data of 20 banks in China from 2004-2017 to test the effect of green credit policy on the overall profitability of commercial banks.The empirical results based on DID method show that green credit has a positive impact on short-term profitability of commercial banks.According to the heterogeneity of ownership differentiated banks,it is found that the short-term profitability of large state-owned banks is positively correlated with green credit,the profitability of joint-stock banks is not significantly correlated with green credit,and the short-term profitability of urban banks is negatively correlated with green credit.Finally,the paper combines the development of green credit in China with the results of empirical analysis,and puts forward feasible suggestions.It is hoped that commercial banks will seek new profit growth points while carrying out green credit business,and then promote the formulation and implementation of green credit policy in China,so as to contribute to the construction of ecological civilization in China.