To what extent does it deviate from substantive green innovation: the effect of capital market opening on enterprises’ pseudo-green innovation

Jingxi Zhao and Xuewei Sun

Applied Economics, 2026, vol. 58, issue 1, 55-68

Abstract: Corporate green innovation is an important driving force for sustainable development. However, to build a favourable green image, enterprises may deviate from long-term, ground-breaking innovation to align with the preferences of the government and investors. This deviation is regarded as pseudo-green innovation. Using the data of Chinese A-shares listed companies from 2007 to 2022, we take the Shanghai – Hong Kong Stock Connect and Shenzhen – Hong Kong Stock Connect mechanisms as quasi-natural experiments. We then construct a staggered difference-in-differences model to explore how capital market opening affects corporate pseudo-green innovation. Our results show that capital market opening inhibits the pseudo-green innovation of Chinese enterprises. Increasing analyst attention and relieving corporate financing constraints are two important channels for capital market opening to inhibit pseudo-green innovation. We also find that the inhibitory effect of capital market opening on pseudo-green innovation is obvious in high-tech industries, industries with high market competition and enterprises in financial distress. This study expands the research on the economic consequences of capital market opening and has important practical significance for strengthening the intensity of capital market opening.

Date: 2026
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DOI: 10.1080/00036846.2024.2448612

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