Capital market liberalization and green innovation for sustainability: Evidence from China

This paper investigates the impact of capital market liberalization on green innovation. In our theoretical examination, we empirically analyze data on 1,693 listed firms in China in 2008–2019, using a time-varying difference-in-differences model. The results show that capital market liberalization promotes green innovation in China and has a stronger effect on green invention patents than green utility model patents. Heterogeneity analysis results show that the positive effects varies across firms with different types of ownership or scale as well as between AH cross-listed and non-AH cross-listed firms. 1 1 AH cross-listed firms refers to companies listed on both China’s A-share market and H-share market. Finally, this research finds that capital market liberalization spurs green innovation through both reducing financing constraints and information disclosure quality effects.