Green finance policy and corporate digital transformation: Evidence from China using a difference-in-differences approach

Abstract

This paper examines whether green finance policy promotes corporate digital transformation (CDT) at the firm level. Using China’s Green Finance Reform and Innovation Pilot Zones (GFRIPZ), launched in 2017, as a quasi-natural experiment, we apply a difference-in-differences approach to Chinese A-share-listed firms from 2011 to 2022. The final sample contains 26,940 firm-year observations from 3,679 firms. The baseline model controls for firm-level characteristics and includes firm and industry-year fixed effects. The results show that GFRIPZ increases CDT by 0.013 units (p < 0.01), equivalent to about 20.6% of the sample mean. This finding remains robust after parallel trends tests, placebo tests, alternative measures of CDT, exclusion of municipalities, exclusion of other policy interference, PSM-DID estimation, and heterogeneous treatment effect estimators. Mechanism tests indicate that GFRIPZ promotes CDT mainly by easing financing constraints and increasing innovation resource input. The effect is more pronounced among non-state-owned enterprises, large firms, and firms with higher market positions. The findings suggest that green finance policy can serve not only as an environmental governance tool but also as an institutional driver of firms’ digital upgrading. Policy makers should better integrate digital transformation objectives into green finance frameworks and provide differentiated support for resource-constrained firms.