Abstract
Using data from A-share listed companies in the heavy polluting industries in Shenzhen and Shanghai from 2011 to 2020, matched with the Peking University Inclusive Finance Index, this paper empirically investigates the impact of digital finance on the green innovation of heavy polluting enterprises and its mechanism of action. According to the study, substantially polluting businesses’ adoption of green innovation was significantly facilitated by digital financing. The mechanism path analysis found that digital finance promoted green innovation in heavy polluting enterprises by reducing internal financing constraints and financing costs. Further analysis found that firms’ internal leverage and financial risk strengthened the impact of digital finance on green innovation of heavy polluting firms. Following a number of robustness tests, the conclusions still hold. The preceding conclusions have ramifications for policy. First, the development of digital finance should be further deepened and financial instruments should be used to promote green development. Second, heavy polluting enterprises should be guided to aim for green innovation and give full play to the advantages of digital finance.
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