How Do Regional Climate-Friendly Technological Innovations Affect Corporate Leverage? Evidence From China

Abstract

Regional climate-friendly technologies can reduce regional carbon emissions and lower the intensity of local governments’ policies faced by firms. How does this affect corporate leverage? Using theoretical analysis, this paper conducts empirical tests of Chinese city data and samples of A-share listed companies in Shanghai and Shenzhen from 2008 to 2020 to study the impact of regional climate-friendly technological innovations on corporate leverage and its transmission path. The results of the study show that regional climate-friendly technological innovations increase corporate leverage, and corporate leverage rises gradually as the level of climate-friendly technological innovation in urban areas increases. Additionally, regional climate-friendly technological innovations indirectly affect enterprise leverage by influencing short-term financial investment and long-term real investment. Specifically, regional climate-friendly technological innovations reduce enterprises' short-term financial investment and promote enterprises' long-term physical investment. The reduction of short-term financial investment and the improvement of long-term physical investment both increase the leverage ratio of enterprises.