Can green finance policy reduce corporate carbon emissions? Evidence from a quasi-natural experiment in China

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The construction of pilot zones for green finance reform and innovation (PZGFRI) is China's regional exploration aimed at increasing financial support for green transformation and development. However, its impact on corporate carbon emission governance is uncertain. This paper examines the impact of the PZGFRI policy on corporate carbon emissions (CCEs) and its mechanisms based on the difference-in-differences model. The results indicate that this PZGFRI policy notably reduces the carbon emissions of enterprises in the pilot regions. Mechanism analysis reveals that this green finance policy reduces CCEs via alleviating corporate financing constraints, promoting corporate green innovation and corporate ESG performance. Heterogeneity results show that this negative impact is more pronounced for non-SOEs than SOEs. Furthermore, the PZGFRI policy dramatically reduces the carbon emissions of enterprises with short-sighted managers, while having insignificant performance on those with long-sighted management. Moreover, carbon reduction effect is notable for high-carbon industry enterprises, and this impact is insignificant for non-high carbon emission industry enterprises. Additionally, this policy has a prominent carbon reduction influence on enterprises in eastern and central regions, but its effect is minimal for those in western regions. This paper provides empirical evidence for other countries to implement green finance policies to promote low-carbon transformation development.