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Public climate finance and corporate green innovation: Does external monitoring matter?

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  • Mbanyele, William
  • Huang, Hongyun
  • Liu, Ying
  • Zhu, Bingcheng

Abstract

In this study, we examine whether public climate finance stimulates the production of environmentally friendly technologies using Chinese listed firms from 2006 to 2020. We document that the incentive impact of public climate finance is tilted towards low-quality green utility model patents. We also observe that firms continue to concentrate on incremental green patenting strategy in response to green subsidies even after the construction of green finance pilot zones. The sensitivity of environmental innovation productivity in response to public climate finance is stronger for firms with severe financial constraints, with no political connections and those with less corruption tendencies. Additionally, we observe a substantial impact of public climate finance on green technologies after the anti-corruption campaign, unmasking how agency costs and rent-seeking activities distort the incentive effects of public climate finance. Overall, our findings suggest that public climate finance encourages strategic green patents and is more efficient in enhancing high-quality green innovation under intense external monitoring. Also, our findings provide fresh evidence aligning with the grabbing hand view of government that corruption causes negative externalities as an inefficient equilibrium.

Suggested Citation

  • Mbanyele, William & Huang, Hongyun & Liu, Ying & Zhu, Bingcheng, 2026. "Public climate finance and corporate green innovation: Does external monitoring matter?," Research in International Business and Finance, Elsevier, vol. 85(C).
    • Handle: RePEc:eee:riibaf:v:85:y:2026:i:c:s0275531926000681
    DOI: 10.1016/j.ribaf.2026.103341
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