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Does Green Finance Drive Environmental Innovation in China?

Author

Listed:
  • Kuo Zhou
  • Yunqing Tao
  • Shuai Wang
  • Haotian Luo

Abstract

The importance of green finance has been fully discussed, however, there is surprisingly little direct evidence of the effects of green finance on eco-friendly practices in firms. We explore the effect of green finance on environmental innovation at the firm level using unbalanced data on Chinese A-share listed firms excluding financial firms during 2008–2019. We find compelling evidence of a significant positive effect of green finance on firm environmental innovation. An examination of underlying mechanisms further show that green finance can be effective in by easing the financing constraints, alleviating information asymmetric, and strengthening environmental regulation. Our analyses also show that the effect is particularly pronounced in subsamples of central and western China, non-state-owned enterprises (non-SOEs), and large-sized firms. This paper proves the Porter effect of green finance and provides timely implications for regulators concerned with green development.

Suggested Citation

  • Kuo Zhou & Yunqing Tao & Shuai Wang & Haotian Luo, 2023. "Does Green Finance Drive Environmental Innovation in China?," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 59(8), pages 2727-2746, June.
    • Handle: RePEc:mes:emfitr:v:59:y:2023:i:8:p:2727-2746
    DOI: 10.1080/1540496X.2023.2190847
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    Cited by:

    1. Kai Zhang & Dongyuan Liu, 2023. "Does Green Finance Promote Export Sophistication? An Analysis of the Moderating Effect Based on Green Taxes," Sustainability, MDPI, vol. 15(10), pages 1-18, May.

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