Financial mechanism for sustainability: the case of China’s green financial system and corporate green investment

Fahad Khalid, Chih-Yi Su, Kong Weiwei, Cosmina L. Voinea and Mohit Srivastava

China Finance Review International, 2024, vol. 15, issue 1, 93-116

Abstract: PurposeThis study empirically evaluates the effect of China’s 2016 Green Financial System (GFS) framework on corporate green development, focusing on the role of green investment in achieving sustainability.Design/methodology/approachThis study uses a quasinatural experiment design to combine difference-in-difference and propensity score matching methods for analysis. It examines 799 polluting and 1,130 nonpolluting firms from 2013 to 2020, enabling a comprehensive assessment of the GFS framework’s influence.FindingsThis study affirms a statistically significant positive influence of the GFS framework on escalating green investment levels in polluting firms. Robust sensitivity analyses, encompassing parallel trend assessment, entropy balancing test, and alternative proxies, corroborate these findings. A mediation analysis identifies the implementation of an environmental management system as the potential underlying mechanism. A cross-sectional analysis identifies high financial slack, high profitability, mandatory CSR regulations, and marketization level as the influencing factors.Research limitations/implicationsThe study’s findings have critical implications for policymakers, regulators, and companies. Demonstrating the effectiveness of the GFS framework in driving green investment underscores the importance of aligning financial systems with sustainability goals.Originality/valueThis study contributes novel empirical evidence on the positive effect of China’s GFS framework on corporate green development. The quasinatural experiment design, coupled with comprehensive sensitivity analyses, strengthens the robustness of the findings.

Keywords: Green investment; Green policy; GFS; Heavy polluter; DID–PSM; China (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.emerald.com/cfri/article/15/1/93/12459 ... nability-the-case-of (text/html)
https://www.emerald.com/cfri/article-pdf/15/1/93/9706627/cfri-11-2023-0291.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:cfripp:cfri-11-2023-0291

DOI: 10.1108/CFRI-11-2023-0291

Access Statistics for this article

China Finance Review International is currently edited by Professor Chongfeng Wu and Professor Haitao Li

More articles in China Finance Review International from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().