Green innovation effect of pilot zones for green finance reform: Evidence of quasi natural experiment

Financial resources are crucial to green transformation, while how to release the vitality of green innovation in transition economies through financial reform pilots in the context of imperfect financial systems is still rarely explored. We examine the impact of regional green finance reform policy on enterprises' green innovation performance by drawing on the establishment of China's pilot zones for green finance reform and innovations (PZGFRI) in 2017. Using the Difference-in-Difference (DID) method and 16,890 samples in designated zones during 2013-2020, we demonstrate a robust relationship between establishing PZGFRI and increasing green patent applications. Results are still valid after a series of robustness tests such as parallel trend test, placebo test and PSM-DID approach. Further analysis shows that establishing PZGFRI promotes green patent output through intensive R&D input and sustainable development goals. Private-owned and non-heavy-polluting enterprises are more affected by PZGFRI than their counterparts. In view of patent segmentation, the policy impact is more obvious on individual applications than joint applications. This paper reveals that in addition to other existing environmental policies, the location-oriented green finance policy provides more diversified options for implementing sustainable development of enterprises and the "carbon peaking and carbon neutrality" goal of transition economies.