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Green preferences of financial capital and strategic green innovation: governance effects of green investor entry

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  • Jing, Lili
  • Xing, Chenxuan
  • Zhai, Yuanyuan
  • Zhou, Jia

Abstract

It has become increasingly important to better understand how capital markets leverage resource allocation and governance functions to achieve high-quality green innovation. Using panel data on listed companies from 2005 to 2024, this study examines the impact of green investor entry on this type of innovation. The results show that green investor entry significantly promotes strategic green innovation. Mechanism analyses indicate that green investors encourage firms to allocate more innovation resources to green activities with stronger long-term orientation and higher technological content by mitigating managerial short-termism, easing financing constraints, and strengthening external monitoring. Further analysis shows that strategic green innovation reduces future debt financing costs while enhancing long-term market value. From a capital market governance perspective, this study extends the literature on the drivers of corporate green innovation and provides new evidence on how green capital shapes long-term innovation decisions.

Suggested Citation

  • Jing, Lili & Xing, Chenxuan & Zhai, Yuanyuan & Zhou, Jia, 2026. "Green preferences of financial capital and strategic green innovation: governance effects of green investor entry," Finance Research Letters, Elsevier, vol. 102(C).
    • Handle: RePEc:eee:finlet:v:102:y:2026:i:c:s1544612326006094
    DOI: 10.1016/j.frl.2026.110080
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