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Using panel data for Chinese listed firms from 2009 to 2015, this research examines the impact of the green credit policy on the audit fees of heavily polluting firms by adopting a difference-in-difference (DID) model. The results show that the green credit policy increases the audit fees of heavily polluting firms, suggesting that auditors can perceive the risks imposed by the green credit policy on heavily polluting firms. Mechanism tests reveal that the implementation of the green credit policy increases audit fees by increasing the financing cost and reducing the loan maturity. Further research shows that the positive effect is more significant in regions with stronger regulatory environments and higher trust, and among firms without political connections and audited by the top-ten domestic audit firms. The Chinese government should actively encourage third-party financial institutions to participate in firms' environmental governance. [ABSTRACT FROM AUTHOR]

How to inspire firms to conduct green innovation is still an under‐explored question. This study finds that the green concerns of minority shareholders can significantly promote firms to conduct green innovation. Mechanism tests reveal that green concerns promote firm green innovation by increasing media attention and reducing financing constraints. Further research shows that the positive effect of green concerns of minority shareholders on green innovation is more significant for companies with high competition, more effective internal controls, and high public involvement at the location. Based on the findings, policy implications of promoting corporate green innovation are discussed. [ABSTRACT FROM AUTHOR]