Digital Finance and Green Technology Innovation: A Dual-Layer Analysis of Financing and Governance Mechanisms in China

As China advances its green transition, digital finance broadens firms’ access to external financing; however, whether improved access enhances financial allocation efficiency or drives green technology innovation remains unclear. This study addresses this through a dual-layer framework examining financing mechanisms and governance conditions. Using panel data from 2165 Chinese A-share firms (2011–2022) with two-way fixed-effects models, the analysis yields three key findings: First, digital finance significantly enhances green technology innovation. Second, financial mismatch partially mediates this relationship. Third, governance moderates these effects. Equity incentives exhibit threshold effects, where positive impacts emerge only above certain levels. Cash incentives, however, vary by period: they are positive in 2011–2018 and negative in 2019–2022. These results underscore that financial reform must accompany governance improvements, especially equity incentives. The Chinese experience also provides insights for emerging economies navigating digital finance expansion and green transition.