Is inhibition of financialization the sub-effect of the green credit policy? Evidence from China

•The implementation of GCGs inhibited financialization of the heavily polluting enterprises.•Financing constraint plays mediating roles between GCGs and financialization of the heavily polluting enterprises.•The inhibitory effect of GCGs is more pronounced in small and medium-sized enterprises, the enterprises whose CEO with financial experience, enterprises in regions with low financial development and weak external supervision. This study investigates the impact of green credit policy on the financialization of heavily polluting firms by regarding the promulgation of the “Green Credit Guidelines” (GCGs) in China as a quasi-natural experiment. The results show that the green credit policy significantly inhibits the financialization of heavily polluting firms, and financing constraints play mediating roles between them. Furthermore, we find that the inhibitory effect of GCGs is more pronounced in small firms, the firms whose CEO with financial work experience, firms in regions with low financial development. Our results provide new insights into the value of the green credit policy.