Financial mechanism for sustainability: the case of China’s green financial system and corporate green investment
Abstract
Purpose
This study empirically evaluates the effect of China’s 2016 Green Financial System (GFS) framework on corporate green development, focusing on the role of green investment in achieving sustainability.
Design/methodology/approach
This study uses a quasinatural experiment design to combine difference-in-difference and propensity score matching methods for analysis. It examines 799 polluting and 1,130 nonpolluting firms from 2013 to 2020, enabling a comprehensive assessment of the GFS framework’s influence.
Findings
This study affirms a statistically significant positive influence of the GFS framework on escalating green investment levels in polluting firms. Robust sensitivity analyses, encompassing parallel trend assessment, entropy balancing test, and alternative proxies, corroborate these findings. A mediation analysis identifies the implementation of an environmental management system as the potential underlying mechanism. A cross-sectional analysis identifies high financial slack, high profitability, mandatory CSR regulations, and marketization level as the influencing factors.
Research limitations/implications
The study’s findings have critical implications for policymakers, regulators, and companies. Demonstrating the effectiveness of the GFS framework in driving green investment underscores the importance of aligning financial systems with sustainability goals.
Originality/value
This study contributes novel empirical evidence on the positive effect of China’s GFS framework on corporate green development. The quasinatural experiment design, coupled with comprehensive sensitivity analyses, strengthens the robustness of the findings.
Keywords
Acknowledgements
We thank the National Natural Science Foundation of China (Grant No. 71802138) and Innovation Project of Guilin University of Electronic Technology Graduate Education (2023YCXS091) for financial support.
Conflict of interest statement: Authors declare no conflict of interest.
Citation
Khalid, F., Su, C.-Y., Weiwei, K., Voinea, C.L. and Srivastava, M. (2024), "Financial mechanism for sustainability: the case of China’s green financial system and corporate green investment", China Finance Review International, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/CFRI-11-2023-0291
Publisher
:Emerald Publishing Limited
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