Does macroprudential policy matter for corporate green innovation? The role of financing constraints and public environmental concerns

Abstract

Green development ideas are gradually being incorporated into macroprudential policy frameworks, which can be of great significance for enterprises’ green development. Most studies focus on the macroeconomic impact of macroprudential policies (MPPs). However, the extent to which MPPs affect corporate green innovation (GI) at the corporate level remains unclear. Based on 12,280 firm-year records from China's A-Share Listed Companies spanning 2011–2020, combined with Environmental Kuznets Curve (EKC) hypothesis, we discover a firm tendency to promote GI under loosening MPPs, which is then curtailed after reaching a certain threshold. The impact is primarily channelled through public environmental concerns and financing constraints, as evidenced by an inverted U-shaped relationship. Additionally, MPPs are more likely to influence corporate GI in regions with high green finance development. Furthermore, we observed a consistent superiority of strategic over substantive GI, with green process innovation being the least impacted. Our results highlight the importance of rational design of MPPs not only at the macro level but also as a priority at the corporate level, as such a policy loosening and tightening will affect the GI activities of corporations.