The Dual Effects of Green Credit on Commercial Bank Performance in the Context of Digital Transformation

This study examines the dual effects of green credit on the performance of commercial banks within the context of digital transformation. We employ a two-way fixed effects model with Return on Assets as the key performance indicator. The baseline regression results reveal a significant positive relationship between the green credit ratio and bank profitability, a finding that remains robust across alternative model specifications and variable measurements, including the use of Tobit models and absolute green credit volume. Heterogeneity analysis indicates that this positive effect is more pronounced in state-owned banks and city commercial banks, while it is insignificant or potentially negative for joint-stock and rural commercial banks. Furthermore, a mechanism analysis identifies credit risk reduction, evidenced by a lower non-performing loan ratio, as a key channel through which green credit enhances bank performance. The study concludes that green credit policies generally contribute positively to commercial bank performance, particularly when supported by digital transformation, and offers implications for policymakers and financial institutions seeking to promote sustainable finance.