Capital market opening up and corporate green technology innovation: Evidence from China’s Stock Connect program

Taking the implementation of China's Stock Connect program as a quasi-natural experiment, we use the difference-in-differences (DID) method to document the relationship between the capital market opening up and corporate green technology innovation from 2007 to 2020. The results show that the capital market opening up significantly promotes corporate green technology innovation by reducing financing constraints and raising firms' environmental protection awareness. However, this effect is more pronounced in non-state-owned enterprises and enterprises with higher initial productivity, higher regional marketization degree, or fiercer industrial market competition. Additionally, by improving corporate green technology innovation, the capital market opening up can further promote the total factor productivity of firms. Using evidence from China, we verify from the micro level that the capital market opening up is crucial for developing economies in their sustainable development.