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Fiscal reform and green innovation: Evidence from China's local debt management reform

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  • Li, Tian
  • Qi, Feng

Abstract

This quasi-natural experimental study examines how China's local government debt management reform affects corporate green innovation. The findings show that the reform significantly promotes green innovation by reducing financial constraints and efficient resource allocation. Mechanism analysis reveals that while higher default risk strengthens the effects of the reform, firms with higher total factor productivity (TFP) benefit more from resource optimization and policy incentives. Heterogeneity analysis shows stronger impacts in regions with less developed markets and firms with high capital density. These findings are confirmed through robustness tests. This study underscores the importance of macroeconomic policies in driving sustainable development and corporate innovation.

Suggested Citation

  • Li, Tian & Qi, Feng, 2025. "Fiscal reform and green innovation: Evidence from China's local debt management reform," Finance Research Letters, Elsevier, vol. 76(C).
    • Handle: RePEc:eee:finlet:v:76:y:2025:i:c:s1544612325002016
    DOI: 10.1016/j.frl.2025.106937
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