Does green innovation facilitate firms' access to trade credit?

Abstract

Employing a large sample of Chinese firms, this study examined the influence of corporate green innovation on firms' access to trade credit. The results indicated a positive association between green innovation and firms' capability to access trade credit, suggesting that suppliers value firms' green innovation capabilities. This relationship was strengthened after the implementation of the new Environmental Protection Law (EPL) in 2015, which enhanced the value of green innovation. The findings remained robust to several robustness tests. The results suggest that green innovation helps firms access trade credit through better environmental, social, and governance (ESG) scores and more state subsidy channels and plays a more pronounced role for financially constrained firms, non-state-owned enterprises, firms with lower bargaining power, and firms located in regions with better intellectual property rights protections. Green innovation is valuable for future corporate growth and shareholder value. Overall, this study reveals the value of green innovation through informal corporate financing.