Green finance policy and enterprise green development: Evidence from China

Global environmental issues are becoming increasingly prominent, and green finance may play a key role in achieving sustainable development. This study takes the "Green Financial Reform and Innovation Pilot Zone" policy as a quasi-natural experiment. The Difference-in-Difference model and Propensity Score Matching-Difference in Difference model are applied to examine the direct effect of green finance policy on the green development of enterprises. A mechanism test model is used to investigate its indirect transmission mechanism. Then several heterogeneity analyses are performed from five perspectives. The results show that green finance policy considerably promotes enterprise green development and the conclusion is supported by a series of robustness tests. The mechanism analyses show that financing constraints and green innovation are the two transmission channels for green finance policy affecting enterprise green development. The heterogeneity analyses indicate that the policy effect is more significant among enterprises those are non-state-owned, have managers with a financial background, operate in regions with high marketization, belong to industries with low monopoly, and locate in poilt zones of Zhejiang, Guangdong, and Guizhou. Based on the above findings, policy suggestions are made to establish a win-win scenario for the economy and the environment.