Can green finance promote green innovation? The moderating effect of environmental regulation

Green finance has emerged as a main driving force for green development in which green innovation has served as the key approach. However, little is known about how green finance impacts green innovation performance. In this research, we empirically examined the hypotheses by fixed effect model with data of 30 provinces in China during 2008–2019. The result turns out that green finance has significantly positive effect on green innovation in all regions in China, and the effect is stronger in western and central regions than eastern region. Furthermore, we verified the effect of environmental regulations on green innovation, and the results show the effect is larger in eastern region than western and central regions. Additionally, with intense environmental regulations, the effect of green finance in promoting green innovation is enhanced in all regions. Our results thus contribute to unveil the mixed relationships among green finance, environmental regulations, and green innovation. Three policy recommendations for policymakers were also discussed, i.e., improving green finance system, staging green finance policies and regulations, and strengthening environmental regulations design to support green innovation.