The impact of low-carbon city pilot policy on corporate green innovation: Evidence from China

Bin Liu, Lu Gan, Kun Huang and Shiyang Hu

Finance Research Letters, 2023, vol. 58, issue PA

Abstract: To address the risk of climate change, the Chinese government launched a low-carbon city pilot (LCCP hereafter) policy to stimulate corporate innovation and reduce carbon emissions. In this paper, we utilize a staggered difference-in-difference (DID) methodology to investigate the impact of the LCCP policy on corporate green innovation. Using a sample of Chinese A-share listed firms from 2006 to 2019, we find that LCCP-covered firms engage in more green innovation activities than non-LCCP-covered firms after the launch of the LCCP policy. Mechanism analyses show that the LCCP policy strengthens the incentive for low-innovation-intensive firms to undertake green innovation activities and forces high-environmental-cost firms to shift to green innovation to achieve energy saving, thereby exerting a favorable effect on corporate green innovation. We further discover a stronger LCCP effect when corporate executives have academic experiences and firms receive more lavish government environment subsidies. Additionally, our cross-sectional analyses show that this positive impact of the LCCP policy on green innovation is more pronounced for non-state-owned enterprises and firms in the eastern region.

Keywords: Low-carbon city pilot; Corporate green innovation; Compliance effect and regulation effect; Staggered difference-in-difference (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:58:y:2023:i:pa:s1544612323004270

DOI: 10.1016/j.frl.2023.104055

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