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Does financial risk exacerbate the risk of low-quality green innovation?

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  • Kong, Wei

Abstract

Using panel data from 46 countries for the period 2005–2020, this paper finds that although financial risk does not directly lead to a decline in the quantity of green innovation, it significantly exacerbates low-quality green innovation. This result remains robust after a series of robustness checks. Mechanism regressions show that countries can mitigate the tendency toward low-quality innovation caused by financial risk by introducing FDI, strengthening green innovation cooperation with OECD countries, and improving the quality of their legal systems. Moreover, heterogeneity analysis reveals that the deterioration in green innovation quality due to financial risk is mainly concentrated in non-OECD countries that are economically underdeveloped, have a low innovation base, and suffer from high environmental pollution. This study highlights the importance of analyzing green innovation from a quality dimension, providing insights for countries to effectively respond to financial risk and avoid falling into the trap of low-quality innovation.

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  • Kong, Wei, 2025. "Does financial risk exacerbate the risk of low-quality green innovation?," Pacific-Basin Finance Journal, Elsevier, vol. 90(C).
    • Handle: RePEc:eee:pacfin:v:90:y:2025:i:c:s0927538x25000101
    DOI: 10.1016/j.pacfin.2025.102673
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    JEL classification:

    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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