Green Finance Reform and Corporate Investment Efficiency: Evidence from China

Abstract

Improving investment efficiency is important for sustainable development, yet the mechanisms through which China’s Green Finance Reform and Innovation (GFRI) policy affects corporate investment efficiency remain underexplored. Using data from Chinese listed companies, this paper finds that the GFRI policy significantly improves corporate investment efficiency. The external channel operates through increased analyst attention, while the internal channel works through improved ESG performance. The effect is more pronounced among firms with over-investment, non-state ownership, greater financing constraints, lower accounting transparency, lower environmental information disclosure, and non-heavy-polluting industries. The findings suggest that green finance policy can improve capital allocation when market-based external monitoring is combined with stronger internal governance incentives.