Climate Risk and Corporate Green Innovation Bubbles: Evidence from China

The green innovation bubble refers to the phenomenon of a “decoupling between patent quantity and quality” that may arise as firms respond to climate risks, posing a potential threat to the effectiveness of green innovation and sustainable development. Based on data from Chinese A-share listed companies from 2015 to 2023, this study examines the impact of climate risk on corporate green innovation bubbles, as well as the underlying transmission mechanisms and boundary conditions, from the perspective of strategic response. The findings indicate that there is a significant positive association between climate risk and the corporate green innovation bubble. Mechanism tests reveal that this effect operates primarily through three mediating channels: increased attention from green investors, amplified ESG rating divergence, and greater analyst coverage. These factors collectively incentivize firms to engage in “strategic green innovation” in response to external pressures. Heterogeneity analysis shows that the effect of climate risk on the green innovation bubble is more pronounced among small and medium-sized enterprises, firms with relatively optimistic investor sentiment, and firms with stronger ESG performance. Moderation analysis further demonstrates that robust internal controls can effectively mitigate the aggravating effect of climate risk on the green innovation bubble. This study uncovers the formation mechanism underlying the coexistence of “quantity expansion” and “quality lag” in corporate green innovation under climate risk. It provides both theoretical and empirical evidence for identifying and addressing innovation bubbles during the green transition, offering policy insights for improving green innovation incentive mechanisms and reducing greenwashing risks.