Green credit policy and labor investment efficiency: evidence from China

Green finance plays a crucial role in driving green development. By leveraging the implementation of the "Green Credit Guidelines" as a quasi-natural experiment in 2012, our study provides compelling evidence that this green credit policy enhances the efficient investment in labor. Our mechanism analysis indicates that the positive impact primarily stems from the upgrading of human capital and the mitigation of agency conflicts. Moreover, we find that the effect of the green credit policy on the efficient investment in labor by green credit-restricted firms is more pronounced when these firms face robust environmental law enforcement and operate with low labor intensity. Additionally, the enhanced investment in labor demonstrates a significant positive influence on future enterprise value. Overall, our findings underscore the significant improvement in corporate labor investment efficiency resulting from the successful implementation of the Green Credit Guidelines.