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Does local government debt promote firm green innovation? Evidence from the Chinese local government debt governance reform

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  • Li, Anjie
  • Qiu, Junjie

Abstract

Green innovation is a crucial strategy for fostering a green economy and achieving sustainable development. This paper focuses on the role of government debt in the sustainability of firm green innovation, particularly in the context of Chinese local government debt governance reform in 2014 (CLGDGR2014). By analyzing annual data of Chinese publicly listed firms from 2011 to 2018, the study explores the impact of CLGDGR2014 on firm green innovation and the underlying driving mechanisms. The findings suggest that CLGDGR2014 improves the firm green innovation, by alleviating firms' financing constraints and underscoring the productive function of local government debt in advancing new infrastructure development. The further analysis explores the impact of various types of debt on green innovation after CLGDGR2014 and indicates that explicit local government debt has a promoting effect while implicit local government debt is not obvious. In conclusion, this research offers new insights into leveraging and managing local government debt to stimulate green innovation.

Suggested Citation

  • Li, Anjie & Qiu, Junjie, 2024. "Does local government debt promote firm green innovation? Evidence from the Chinese local government debt governance reform," Economic Analysis and Policy, Elsevier, vol. 84(C), pages 1046-1062.
    • Handle: RePEc:eee:ecanpo:v:84:y:2024:i:c:p:1046-1062
    DOI: 10.1016/j.eap.2024.10.010
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