Can green finance policies affect corporate financing? Evidence from China's green finance innovation and reform pilot zones

Abstract

This study investigates the impact of China's Green Finance Innovation and Reform Pilot Zones on corporate financing. I view the "Green Finance Innovation and Reform Pilot Zones" piloted in certain provinces in China as a quasi-natural experiment and use a Difference-in-Differences (DID) approach to explore the impact of this policy on corporate debt financing costs and financing scale. The results show that the green finance pilot zone policy increases the financing scale of green enterprises and reduces that of polluting enterprises, but it does not significantly impact financing costs. The policy provides more apparent financial support for non-state-owned and small scale green enterprises, while imposing stricter constraints on the financing scale of large and less profitable heavy polluting enterprises. Additionally, the policy's "incentive effect" on green innovation in green enterprises is not significant. However, its "compelling effect" on green innovation in polluting enterprises is quite noticeable.