Green public procurement as a policy signal: Attracting green investors despite local protectionism

Governments increasingly utilize green public procurement (GPP) to steer markets toward sustainability, yet its indicative role in attracting green investors and the distorting effects of local protectionism remain underexplored. Using procurement contract and listed company data, this paper examines GPP’s effect on green investors and its underlying mechanisms, while investigating the distorting effect exercised by local protectionism on policy signals. Our findings reveal that GPP significantly enhances corporate appeal to green investors by improving information transparency, strengthening market competitiveness, and curbing greenwashing. Heterogeneity analyses show that firms’ conditions and the external institutional environment influence the effect of procurement policies. However, local protectionism undermines GPP’s credibility, as politically connected companies can distort procurement results and increase investor skepticism. These findings provide theoretical support and practical insights for optimizing green fiscal policy systems and mitigating local administrative intervention.