The role of principal-agent in corporate financialization and green innovation

Yijing Huang and Zongyu Xu

Finance Research Letters, 2024, vol. 63, issue C

Abstract: This paper explores the relationship between corporate financialization and green innovation with a sample of A-share listed companies in China from 2012 to 2022. It is found that the crowding-out effect of corporate financialization on green innovation is greater than the reservoir effect, thus inhibiting green innovation. However, internal control capability and equity incentives can alleviate principal-agent conflicts and prompt corporate managers to reduce the negative impacts of financialization on green innovation in the long run, further revealing the decision-making process of how corporate managers weigh short-term financial interests against long-term innovation development.

Keywords: Corporate financialization; Green innovation; Internal control; Equity incentives (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:63:y:2024:i:c:s1544612324004215

DOI: 10.1016/j.frl.2024.105391

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