Considering China's green credit policy (GCP) as a quasi-natural experiment, this study discusses the effect of GCP on enterprise green innovation (GI) using a difference-in-difference method based on data from Chinese listed companies from 2009 to 2020. The results indicate that green credit enhances the strategic GI of heavy polluters while significantly inhibiting essential GI, thus suggesting the nonexistence of the Porter effect. In addition, the inhibition effect is attributed to an increase in financing constraints and a reduction in government subsidies, firm research and development investment, and employment scale. This disincentive effect is particularly pronounced in privately owned firms, small cities, and capital-intensive low-profitability firms. Resource misallocation caused by the GCP fails to stimulate the green transformation of heavily polluting industries through the Porter effect. Hence, governments should establish a diversified green financial system, integrate green venture capital and GI elements, and guide the flow of social capital toward green industries.
Keywords: China; green credit; green technology innovation; heavy polluters; sustainable development.