Financing Decarbonization: How Green Finance Policies Affect Corporate Low‐Carbon Innovation?

Abstract

Green finance policies (GFP) play a pivotal role in internalizing environmental externalities and fostering long‐term economic resilience. Leveraging the establishment of the ‘Green Finance Reform and Innovation Pilot Zone’ as a quasi‐natural experiment, this paper adopts a multi‐period difference‐in‐differences (DID) specification to investigate the impact of GFP on corporate low‐carbon innovation (LCI), based on a sample of Chinese A‐share listed firms from 2012 to 2023. Empirical results indicate that GFP exerts a significantly positive effect on overall corporate LCI; the effect is stronger for strategic LCI (ST‐LCI) than for substantive LCI (SU‐LCI). Mechanism testing indicates that GFP promotes LCI primarily by mitigating financing constraints, incentivizing R&D investment and enhancing intellectual property protection. Heterogeneity analyses suggest that the policy effect is more pronounced in firms with higher managerial human capital, those in highly competitive industries and those located in the southeastern coastal regions of China. Furthermore, we identify a positive spatial spillover effect of GFP on corporate LCI. This paper makes marginal contributions by classifying low‐carbon innovation, verifying multi‐channel mechanisms and identifying spatial spillovers, thereby providing empirical evidence and policy insights for advancing corporate low‐carbon transition.