Environmental pollution liability insurance policy and corporate green innovation: The effect of environmental governance and internal governance

As a crucial component of green finance, environmental pollution liability insurance exerts a substantial influence on corporate green innovation globally. Since 2007, China’s pilot work in this area has gradually advanced and become a model for other countries. In this study, we examine the panel data of publicly listed companies in China from 2007 to 2023 to analyze the effect of the environmental pollution liability insurance policy pilot on corporate green innovation. The findings reveal that implementing socialized environmental governance through the environmental pollution liability insurance significantly enhances corporate green innovation. These results remain valid after conducting robustness tests. Moreover, we analyze the mechanisms driving this effect. Our findings indicate that the insurance promotes corporate green innovation by improving corporate environmental, social, and governance (ESG) performance; enhancing the quality of internal governance; and mitigating financing constraints. Heterogeneity test results indicate that the positive effects are particularly pronounced and strong in non-state-owned, heavy-polluting, and high-tech companies, as well as in a company’s strategic innovation other than substantive innovation.