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The impact of low-carbon city pilot policy on corporate green innovation: Evidence from China

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  • Liu, Bin
  • Gan, Lu
  • Huang, Kun
  • Hu, Shiyang

Abstract

To address the risk of climate change, the Chinese government launched a low-carbon city pilot (LCCP hereafter) policy to stimulate corporate innovation and reduce carbon emissions. In this paper, we utilize a staggered difference-in-difference (DID) methodology to investigate the impact of the LCCP policy on corporate green innovation. Using a sample of Chinese A-share listed firms from 2006 to 2019, we find that LCCP-covered firms engage in more green innovation activities than non-LCCP-covered firms after the launch of the LCCP policy. Mechanism analyses show that the LCCP policy strengthens the incentive for low-innovation-intensive firms to undertake green innovation activities and forces high-environmental-cost firms to shift to green innovation to achieve energy saving, thereby exerting a favorable effect on corporate green innovation. We further discover a stronger LCCP effect when corporate executives have academic experiences and firms receive more lavish government environment subsidies. Additionally, our cross-sectional analyses show that this positive impact of the LCCP policy on green innovation is more pronounced for non-state-owned enterprises and firms in the eastern region.

Suggested Citation

  • Liu, Bin & Gan, Lu & Huang, Kun & Hu, Shiyang, 2023. "The impact of low-carbon city pilot policy on corporate green innovation: Evidence from China," Finance Research Letters, Elsevier, vol. 58(PA).
    • Handle: RePEc:eee:finlet:v:58:y:2023:i:pa:s1544612323004270
    DOI: 10.1016/j.frl.2023.104055
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