Fostering innovation sustainability with the impact of incremental environmental information disclosure under green credit constraints

Businesses are increasingly concerned about sustainability nowadays. There is still little evidence in the literature currently about the role of environmental information disclosure increment (∆EID) in innovation sustainability with green credit constraints. In order to fill the space left by other research, this paper examines the direct and indirect effects of EID increment on innovation sustainability by employing data from listed firms across China between 2012 and 2019. The results indicate that EID can actively promote innovation sustainability. According to the assessment of the impacts channel, “information effect” is more potent than the “reputation effect.” It helps to infer that the disclosure of higher-quality environmental information raises the company's visibility to the public and increases investor trust, which assists an enterprise in obtaining funds to carry on sustainable innovation. When the study analyzed the mediating mechanism, it was found that green credit policy strengthens the relationship between environmental information disclosure and innovation sustainability. Grouping tests on the sample from the perspective of property ownership illustrates that green credit improves the relationship between ∆EID and innovation sustainability in non-state-owned enterprises (NSOEs); however, ∆EID does not influence innovation sustainability through green credit in SOEs. Findings contribute to the literature by revealing that EID increment helps firms access green loans and solve funding limitation issues, thus increasing innovation sustainability.