Is green credit policy financially green for polluting firms' investment efficiency?

The green credit policy was promulgated with the aim of curbing industrial pollution and promoting environmental protection. However, as a direct impact, the policy not only curtails polluting firms' investment scale, but more importantly lowers those firms' Q-sensitivity-based investment efficiency. The results hold firmly after performing a battery of follow-up tests, including pre-treatment trends analysis, placebo tests, matched sample tests, and tests for robustness and addressing endogeneity. Further analysis indicates that the negative impact is more pronounced among polluting firms that are more dependent on external finance, not owned by state, and financially constrained respectively. The decomposition of Tobin's Q provides additional insights, which suggest that the policy simultaneously hurts polluting firms' real growth and forces financial institutions to be more selective toward industry winners.