Can digital finance empowerment reduce extreme ESG hypocrisy resistance to improve green innovation?

The efficiency of sustainable growth has recently become a challenge attracting controversy. This paper provides a new investigation on the effect of digital finance on green innovation by solving the extreme corporate environment, social, and governance (ESG) hypocrisy resistance in firm behaviors. By constructing a unique panel of data spanning from 2013 to 2019, we draw several findings. First, our fundamental result shows that digital finance empowerment can significantly increase green innovation performance. It reveals that digital finance empowerment works efficiently by decreasing the extreme ESG hypocrisy resistance measured by greenwashing. Second, considering the heterogeneous analysis, our results indicate that digital finance empowerment better solves greenwashing issues to improve green innovation for non-state-owned firms, heavily polluting firms, and highly competitive firms. Third, concerning the mechanism's explorations, digital finance empowerment reduces extreme ESG hypocrisy resistance by alleviating financial constraints and compressing management and financial cost. Our findings suggest that regulators can accelerate the financial market's digitization, principally in pursuit of sustainable growth effects.