Financial impact analysis of corporate innovation investment under low-carbon policies

Against the backdrop of global carbon peaking and carbon neutrality goals, elucidating the impact of environmental regulation on corporate financial performance is pivotal for achieving green transformation. Leveraging China’s low-carbon city pilot policy as a quasi-natural experiment and utilizing a dataset of A-share listed companies on the Shanghai and Shenzhen exchanges from 2012 to 2023, this paper employs a multi-period difference-in-differences model to empirically examine the impact of low-carbon policies on corporate financial performance and the underlying mechanisms. The findings reveal that the low-carbon city pilot policy significantly bolsters corporate financial performance. Mechanism analysis demonstrates that the policy enhances financial outcomes by incentivizing enterprises to augment R&D expenditures. Heterogeneity analysis indicates that the policy effects are more pronounced among non-state-owned enterprises, high-tech firms, and those located in the eastern region. Furthermore, the analysis establishes that low-carbon policies not only ameliorate short-term profitability but also significantly elevate long-term market value and sustainable development capabilities. This study provides micro-level evidence for the applicability of the Porter Hypothesis within the context of emerging economies, demonstrating that comprehensive environmental policies balancing constraints and incentives can achieve a synergy between environmental protection and economic development, thereby offering valuable policy insights for developing nations.