Environmental regulation, digital finance, and technological innovation: evidence from listed firms in China.

Environmental regulation becomes essential to corporate technological innovation amid increasing concern with environmental issues. However, a clear understanding of the specific role of environmental regulation's ex-post effectiveness is lacking. Using the panel data of Chinese A-share listed firms during 2011-2018, we examine the effects of environmental regulation on corporate technological innovation. The results indicate that environmental regulation negatively affects corporate technological innovation. With regard to digital finance, it benefits for corporate technological innovation and positively moderates the relationship between environmental regulation and corporate technological innovation. The heterogeneity analysis suggests that the negative impact of environmental regulation over technological innovation is much significant for small-scale firms, western-region firms, and firms with strong financing constraints. Furthermore, the moderating role of digital finance is more significant for firms with strong financing constraints and heavy polluting firms. We also verify the robustness of the regression results. The current study provides both theoretical support and reference to improve corporate technological innovation and promote high-quality economic development through adopting reasonable policy measures.