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Corporate financial fragility, R&D investment, and corporate green innovation: Evidence from China

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  • Zhang, Zuomin
  • Wu, Yingjue
  • Wang, Honglei

Abstract

We investigate the impact of corporate financial fragility on corporate green innovation and its underlying mechanisms. Using a sample of Chinese A-share listed firms from 2013 to 2019, we find that financially fragile firms are more likely to reduce green innovation than general innovation. Mechanism analysis indicates that corporate financial fragility diminishes firms' R&D investments, restraining their green innovation activities. Furthermore, we observe that overall subsidies increase R&D expenditure but that this effect is similar for firms that are more financially fragile. However, subsidies have a less intense effect on increasing green patents for financially fragile firms than for other firms; for firms that receive more subsidies, the effect of R&D on green patents is slightly more substantial. This study elucidates the mechanism of corporate financial status on corporate green innovation and compares the different impacts of government subsidies on green innovation between financially fragile firms and general firms.

Suggested Citation

  • Zhang, Zuomin & Wu, Yingjue & Wang, Honglei, 2024. "Corporate financial fragility, R&D investment, and corporate green innovation: Evidence from China," Finance Research Letters, Elsevier, vol. 62(PB).
    • Handle: RePEc:eee:finlet:v:62:y:2024:i:pb:s1544612324002204
    DOI: 10.1016/j.frl.2024.105190
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    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation

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