Does digital finance improve the green investment of Chinese listed heavily polluting companies? The perspective of corporate financialization

While now appears appropriate to assert that digital finance can relieve firms' financing constraints, the picture of whether it can improve enterprises' green investment is much less clear. Using 2011-2019 data for Chinese listed heavily polluting (HP) enterprises, we examine the effects of digital finance on corporate green investment. Results show that digital finance impedes HP firms' green investments, and this finding is robust to various tests, including the instrumental variable approach, exogenous shock, and alternative measures of variables. Additional tests reveal that digital finance increases firms' financial investment, which crowds out green investment. Also, this inhibitory impact varies with firms' geographical location, industry characteristics, and the implementation of the new Environmental Protection Law. The findings of this study provide new perspectives on digital finance by identifying its negative impact on the corporate green environment. We also propose corresponding policy recommendations, including strengthening the regulation and guidance of digital finance development, reducing monopolies in the financial sector, and formulating differentiated environmental policies.

Automated summary

This study examines the effects of digital finance on the green investment of heavily polluting enterprises in China. The results indicate that digital finance hinders green investments and leads to a crowding-out effect in financial investment. Furthermore, the impact varies depending on the geographical location, industry characteristics, and environmental regulations of the firms.