Capital market opening and green innovation--Evidence from Shanghai-Hong Kong stock connect and the Shenzhen-Hong Kong stock connect

We investigate the effect of the capital market opening on green innovation. Using the Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect as a quasi-natural experiment, we find that the capital market opening improves corporate green innovation in China. The alleviation of information asymmetry and improvement of environmental awareness are two plausible mechanisms for the Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect to promote green innovation. Finally, we identify innovation strategy and further show that enterprises will excessively pursue quantity of green innovation in the short term and carry out strategic innovation. Our study offers novel evidence on a previously under-explored capital market opening that affects corporate green innovation and is related to the literature on the economic outcomes of green innovations.