Work

Green innovation under financial and policy uncertainty: Evidence from China

Year: 2025

Type: article

Abstract: This study examines the effect of idiosyncratic risk on the green innovation of A-share listed companies in China from 2010-2021, using idiosyncratic risk as a proxy for financial risk. Results indicate that idiosyncratic risk adversely affects a firm's green innovation, which is negatively moderated by heightened economic policy uncertainty (EPU), highlighting that firms tend to defer or halt green innovation investments under high EPU, appreciating the 'real option' value of a decision to 'wait-and-see'. Further, policy determinant analysis reveals that the negative moderation originates from trade-related policy uncertainties. Heterogeneity analysis reveals that the primary findings are more pronounced in non-SOEs and those companies determined to be larger, older, and more leveraged firms with elevated ESG performance. Findings are found to be robust across several various econometric approaches. This research contributes to the literature on corporate green innovation by analysing the moderating role of EPU and providing insights for managers, investors, and policymakers.

Source: Research in International Business and Finance

DOI: 10.1016/j.ribaf.2025.102856

Authors: Sultan Sikandar Mirza, Ninglu Xu, Shaen Corbet, Frank Scrimgeour

Institutions: Dublin City University, Hangzhou City University, University of Waikato

Language: English

Topic: Environmental Sustainability in Business

Subfield: Marketing

Field: Business, Management and Accounting

Domain: Social Sciences

SDGs: Industry, innovation and infrastructure, Climate action

Open Access status: hybrid

Estimated APC paid: $3,820