The impact of green finance policy on total factor productivity: Based on quasi-natural experiment evidence from China

Treating the implementation of green finance policy as a quasi-natural experiment, we explore its effect on the total factor productivity of firms, then perform several tests to illustrate the stability of this effect, and then explain this effect based on financing constraint and technological innovation. It has been found that the green finance policy has an inhibitory effect on total factor productivity, which is validated in various tests including the parallel trend test, the heterogeneity treatment effect test, and the robustness test including the placebo test and endogeneity test. The heterogeneity analysis shows that different ownership types and industry type of firms have different impacts on this effect. Further extended analysis reveals that the policy leads to the flow of financial resources from polluting firms to non-polluting firms. There is no significant improvement in technological innovation in non-polluting firms, while there is a significant decline in technological innovation in polluting firms due to lack of credit support. Finally, we make several recommendations based on our findings to achieve precise implementation of the green finance policy.