Green finance and corporate environmental performance

Abstract

While green finance has emerged as a crucial mechanism for promoting sustainable development, the pathways through which it influences corporate environmental performance remain incompletely understood. Previous research has primarily focused on direct relationships between financial instruments and environmental outcomes, overlooking the complex organizational mechanisms that mediate and moderate these effects. This study examines how green finance affects corporate environmental performance through technology upgrading while considering the moderating role of corporate reputation. Using panel data from Chinese listed companies spanning 2010–2021, our findings reveal that green finance significantly enhances corporate environmental performance both directly and indirectly through technology upgrading pathways. This relationship is strengthened by corporate reputation, suggesting that reputational capital amplifies firms’ responses to green finance initiatives. However, these effects vary substantially across ownership types and industries, with state-owned enterprises showing stronger responses and high-polluting industries demonstrating limited improvement. These results advance our understanding of environmental governance mechanisms by illuminating the organizational pathways through which financial instruments influence corporate environmental behavior, while providing practical insights for policy design and corporate strategy in the transition toward sustainable development.