Mitigating Financing Constraints to Foster Green Transition : The Role of Green Bonds in China

In recent years, there has been a "green bond boom" in China's investment market. This study investigates whether and how green bond issuance affects corporate innovation in China. We build a macroeconomic growth model that includes heterogeneous corporate sectors with green products to demonstrate the financial advantage of green bonds in supporting innovation. Based on the difference-in-difference model and the matching method, we conduct an empirical test and find that green bond issuance significantly increases corporate patent applications and promotes green transition. In terms of patent types, green bonds have a more significant impact on invention patents and utility patents, but a less significant impact on appearance patent applications. In terms of channels, we find that green bonds provide financial benefits to firms mainly by easing financial constraints rather than reducing financial costs