Stock market liberalization and corporate green innovation: Evidence from China

Abstract

Corporate green innovation is an effective way to achieve energy conservation and emis-sion reduction. Enterprises’ willingness to pursue green innovation is increasingly affected by external factors. By using a quasi-natural experiment of China’s Stock Connect program, we investi-gate the impact of stock market liberalization on corporate green innovation. We find that stock market liberalization increases enterprises’ green innovation, especially for state-owned enterprises. We also find that stock market liberalization plays a stronger role in promoting the green invention patents of enterprises whose managers have overseas experience and enterprises in areas with a higher degree of openness. Our mechanism analysis suggests that stock market liberalization at-tracts the attention of securities analysts and increases managers’ focus on environmental protec-tion, thereby promoting corporate green innovation. Our findings show that stock market liberalization plays an important role in the governance of firms’ non-financial behavior, which has important theoretical and practical implications.