Drivers of China's green finance development from the perspective of incentive regulation

With the rise of the green finance concept in recent years, many policies have been applied to support green financing in China. The current research on green finance is more concerned with the construction of green finance mechanisms and lacks detailed studies about the driving factors behind the rapid development of green finance in China. This paper contributes to the literature by investigating the green finance policies and regulations from the perspective of incentive regulation. The dataset contains the panel data of 1025 firms from the A-shares market and the National Equities Exchange and Quotations (NEEQ) market in China and 31 provinces (municipalities and autonomous regions) for the period of 2009 to 2017. The results indicate that both the financial growth rate and the degree of local attention on environmental preservation will motivate the development of green finance. Unexpectedly, there are unique thresholds for incentives and regulations to promote the growth of green finance. Only when incentives and regulations could alter the behaviour of decision-making entities can they promote the development of green finance. The effectiveness of incentive-based regulatory policies can be enhanced through the appropriate control over the level of incentives and governance