Whether Green Finance Improves Green Innovation of Listed Companies—Evidence from China

Zhao Dong, Haodong Xu (), Zhifeng Zhang (), Yipin Lyu, Yuqi Lu and Hongyan Duan
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Zhao Dong: Institute of Standardization, Qingdao University, Qingdao 266071, China
Haodong Xu: School of Economics, Qingdao University, Qingdao 266071, China
Zhifeng Zhang: School of Economics, Qingdao University, Qingdao 266071, China
Yipin Lyu: College of Engineering and Applied Sciences, The State University of New York at Stony Brook, 100 Nicolls Road, Stony Brook, NY 11794, USA
Yuqi Lu: School of Marxism, East China University of Political Science and Law, Shanghai 201620, China
Hongyan Duan: Department of Economics, The University of Sheffield, Sheffield S10 2TN, UK

IJERPH, 2022, vol. 19, issue 17, 1-23

Abstract: Facing the intensification of global carbon emissions and the increasingly severe pressure of environmental pollution, listed companies urgently need to promote green innovation, achieve green transformation, and alleviate environmental problems. Green finance policy has played a significant role as a financial strategy for environmental governance in affecting green innovation level over the years. In this context, taking the green finance reform and innovation pilot zone (GFRIPZ) implemented in 2017 in China as a quasi-natural experiment, this paper analyzes the impact of green finance policy on green innovation level of listed companies by the difference-in-difference model. Based on the data of Chinese A-share listed companies from 2008 to 2020, the results of empirical analysis show that green finance significantly promotes green innovation of listed companies. The effect is profound on green utility model patents, but less pronounced on green invention patents. Among all these pilot zones, the policy effects of GFRIPZ ranked in descending order are Zhejiang, Guangdong, Jiangxi, Guizhou, and Xinjiang. In addition, green finance has a more significant impact on heavy-polluting industries, large and state-owned enterprises, and listed companies located in the eastern region. Furthermore, the effects of industry heterogeneity ranked in descending order are energy, manufacturing, processing, and engineering industry, while it is not obvious in the service industry. Mechanism analysis suggests that the effect is driven by a reduction in the cost of debt financing and an increase in the long-term debt ratio. The findings provide implications for policymakers to promote the level of green innovation and environmental governance. Therefore, policymakers should support the long-term creative development of green invention patents by reducing the cost of debt financing and increasing the long-term debt ratio and consider the heterogeneous characteristics of listed companies when formulating green finance policies.

Keywords: green finance reform and innovation; green innovation level; debt financing cost; long-term debt ratio; difference-in-difference model (search for similar items in EconPapers)
JEL-codes: I I1 I3 Q Q5 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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