Can digital finance foster green innovation in short-term debt for long-term investment firms?

Abstract

Green innovation plays a crucial role in driving socio-economic green transformation and facilitating high-quality development. However, achieving this objective necessitates substantial long-term capital investment. Currently, many Chinese enterprises face the challenge of relying on short-term debt for long-term investment (SDFLI), which severely limits their capacity to enhance green innovation. Consequently, there is an urgent need to reform the enterprise financing system. This study utilizes data from listed companies in China and the digital finance index to examine the impact and mechanism of rapidly developing digital finance in recent years on the green innovation of enterprises engaged in SDFLI. The findings indicate that SDFLI will significantly impede the green innovation capacity of enterprises. Conversely, the advancement of digital finance enhances the green innovation capacity of such enterprises engaged in SDFLI through reducing corporate credit rents, promoting supply chain finance development, improving accessibility to financial services, alleviating financing constraints, upgrading human capital structure, and increasing investment in research and development. Notably, this impact varies depending on enterprise ownership, size, life cycle stage, and regional variations in environmental regulatory intensity. Further research reveals that digital finance significantly increases the proportion of credit borrowings in the debt structure of SDFLI enterprises. Hence, it is crucial for regions to fully leverage digital finance to empower enterprise development. By enhancing capital allocation efficiency and catering to diverse financial needs, regions can deepen the concept of green development, raise awareness of social environmental protection and supervision, and continuously promote green innovation. This integration of green innovation and sustainable development will provide robust support for the green transformation and high-quality development of the social economy.