Digital finance and corporate green innovation: quantity or quality?

Recently, the rapid development of digital finance in China has exerted a subtle influence on many aspects of social and economic development. However, the research on the impact of digital finance on corporate green innovation is rather lacking. In order to fill this gap, this paper uses the "Peking University Digital Finance Index" to evaluate the micro impact of financial innovation development on environmental governance from the firm level. The results show that digital finance can significantly improve the quantity and quality of corporate green innovation, and this effect still exists after considering endogeneity and a series of robustness tests. The promotion effect of digital finance on the quantity and quality of corporate green innovation is more obvious in state-owned, eastern, and mature enterprises. In addition, we find the mechanism behind the positive relationship between digital finance and corporate green innovation: digital finance makes firms more transparent and funds flow more convenient. Overall, this paper provides a micro explanation of environmental governance for the accelerated popularization of digital finance in emerging markets, which is urgently needed for most emerging economies seeking high-quality development.