Does the strengthened monitoring policy for key polluting enterprises induce China's green innovation?

To put enterprises reduce pollutant emissions and help them achieve sustainable development, China develops some policies related to environmental information disclosure (EID). A typical example is the strengthened monitoring policy for key polluting enterprises (SMPKPE). Green innovation is one of the major means to reduce pollutant emissions. However, the impact of the SMPKPE on green innovation has yet to be studied. Using the sample of China's listed enterprises from 2009 to 2021 and the multiperiod difference-in-differences method, this article examines whether the SMPKPE affects enterprises’ green innovation. The results are shown as followed: (1) the SMPKPE significantly improves enterprises’ green innovation; (2) this improvement can be achieved by strengthening the supervisory roles of banks and investors; (3) the strengths of the policy for enterprises’ green innovation are depended on the degrees of the financial constraint faced by enterprises. Specifically, taking the financial constraint as a threshold variable, it is found that the SMPKPE significantly improves the green innovation of enterprises with high degrees of financial constraint, while the policy reduces the green innovation of enterprises with low degrees of financial constraint; (4) the SMPKPE improves the green innovation of state-owned enterprises but fails to influence the green innovation of nonstate-owned enterprises. On a theoretical level, the conclusions of this article help to deepen the understanding of EID policies. On a practical level, the successful experiences of China provide valuable practical implications for China and other developing countries that currently face dual economic and environmental pressure.