The Role of the Government in Green Finance, Foreign Direct Investment, Technological Innovation, and Industrial Structure Upgrading: Evidence from China

Round 1

Reviewer 1 Report

The paper is written and organized well. But, there are serious problems in the execution of econometric exercises. Therefore, i will make my final decision after receiving te responses. major issues:

1. Is this paper is filling any gap in the exiting literature?

2. how did you decide wht unit root tests to use? Why didn't you carry out cross-sectional dependency test(s) prior to implementing unit root tests?

3. why didn't you consider any dynamic panel method?

4. Have you thought about the possible slope heterogeneity?

5. Have did you dela with endogeneity problem?

Important: You have to understand the distinction betweeen parameter stability and variable's stationarity. Aim of carrying out unit root tests is to determine whethjer the variable is stationary, that is degree of integration of variable not if the coeffieicnts of model are subject to nay structura break(s).

Minor issues:

1. it is beter you icnlude pairwise correlations and their significance between variables.

2. please add a new paragraph to at the end of intrduction describing the sections of paper.

English editing may be necessary. 

Author Response

Response to Reviewer #1:

The paper is written and organized well. But there are serious problems in the execution of econometric exercises. Therefore, I will make my final decision after receiving the responses. major issues:

Response: We appreciate your valuable comments and suggestions. We revised our manuscript following your suggestions. We have used track changes for the revision of the paper. Please read our itemized response below.

Comment 1.  Is this paper is filling any gap in the exiting literature?

Response 1: We appreciate the opportunity to address these points and clarify how our study fills important gaps in the field.

Firstly, our study investigates the role of green finance (GF) in driving advancements in industrial structure upgrading across 31 provinces of China. While there is a growing body of research on green finance and its environmental implications, our study uniquely focuses on the mechanisms underlying this phenomenon, with a particular emphasis on the influences of technological innovation and foreign direct investment (FDI). By delving into these specific factors, we add depth and granularity to the literature surrounding the development of GF and its interconnectedness with the factors shaping industrial structure (IS).

Secondly, we explore the regulatory effects of Environmental Regulatory Intervention (ERI) and the level of government intervention in facilitating the promotion of IS upgrading through GF. China's unique national conditions make government intervention pivotal in this context, and our study sheds light on how regulatory measures can either enable or hinder the advancement of green finance and sustainable industrial development. The findings from our research provide valuable insights for policymakers and practitioners, offering guidance on the formulation of effective government intervention strategies.

Thirdly, we recognize the significant regional disparities in China's development and varying degrees of market orientation across different regions. Our research scrutinizes the heterogeneity of GF's impact on industrial structure, taking into account these regional differences. By doing so, we provide tailored development recommendations customized to regions characterized by economic underdevelopment and a limited degree of market orientation. This aspect of our study is instrumental in formulating policy guidance and recommendations aimed at achieving sustainable development that is sensitive to the unique circumstances of different regions within China.

In summary, our research makes several significant contributions to the existing literature. It deepens our understanding of the role of green finance in industrial structure upgrading, highlights the importance of regulatory intervention in China's context, and offers region-specific insights for sustainable development. We believe that these contributions enhance the academic discourse and provide valuable guidance for both researchers and policymakers in the field of green finance and sustainable industrial development.

Comment 2. How did you decide WHT unit root tests to use? Why didn't you carry out cross-sectional dependency test(s) prior to implementing unit root tests?

Response 2: We appreciate your input, and we would like to address your concerns as follows: In response to your suggestion, we have now conducted a cross-sectional dependency tests, of Pesaran (2004) and results are presented in Table 5.

Regarding the unit root test selection, we opted for the Pesaran CIPS unit root test in line with previous studies and for several compelling reasons. The Pesaran CIPS unit root test is particularly suitable in situations where there is cross-sectional dependence among the observations. This test takes into consideration the presence of cross-sectional dependencies and provides efficient and robust results under such circumstances.

We understand the importance of ensuring the reliability and appropriateness of our methodological choices. By conducting these cross-sectional dependency tests and selecting the Pesaran CIPS unit root test, we aim to address your concerns and enhance the rigor and validity of our analysis. We believe that this approach will yield more accurate and meaningful results, contributing to the overall quality of our research.

Comment 3. Why didn't you consider any dynamic panel method?

Response 3: Thanks for your valuable suggestions. Based on your suggestion, we have added the dynamic panel data method of generalized Methods of Moments (GMM), and the results are presented in columns 5,6 of Table 9.

Comment 4. Have you thought about the possible slope heterogeneity?

Response 4: Thanks for your valuable suggestions. We added the slope heterogeneity test of Pesaran and Yamagata (2008), and the results are presented in 4.

Comment 5. Have did you deal with the endogeneity problem?

Response 5: Thanks for your valuable suggestions. Common endogeneity problems include missing variables, mutual causality, and selective bias. In section 5.8.2, We use the instrumental variable method, which can solve the above three endogenous problems. After testing, we find that the explanatory variables in this paper are not related to the perturbation term, indicating that using the instrumental variable method is reasonable.

Comment 6. It is better you include pairwise correlations and their significance between variables.

Response 6: Thanks for your valuable suggestions. The pairwise correlation test is presented in 3.

Comment 7. Please add a new paragraph to at the end of introduction describing the sections of paper.

Response 7: Thanks for your valuable suggestions. We have now added the paragraph of study structure at the end of the introduction section.

Author Response File: Author Response.pdf

Reviewer 2 Report

Dear Authors,

it is my privilege to read your work and I like the approach to carrying out the work. There are many studies about structure upgrades in China, green technological innovations using panel data over the years. Therefore, i have few observations and comments to incorporate;

(1) Can the title be " Role of Government in Green Finance, foreign direct investment, Technological Innovation, and Industrial Structure Upgrading: A Study of China Based on years panel data.. it makes easy that most information covered in the title.

(2) Introduction is okay

(3) The literature review needs to be updated with recent publications: There are areas of FinTech adoption and Financial Inclusion that bring lots of flexibility and green ecology in the environment so adding these papers can be helpful.

This is related to industry ecological aspects....Xie, B., Jones, P., Dwivedi, R., Bao, L. and Liang, R., 2023. Evaluation, comparison, and unique features of ecological security in southwest China: A case study of Yunnan Province. Ecological Indicators, 153, p.110453.

Related to financial work and related to technological innovation..

Dwivedi, P., Alabdooli, J.I. and Dwivedi, R., 2021. Role of FinTech adoption for competitiveness and performance of the bank: a study of the banking industry in UAE. International Journal of Global Business and Competitiveness, 16(2), pp.130-138.

(4) The methodology of the research needs to be explained through flow diagram that can help readers to understand easily. Right from object to conclusion. Focus about panel data source  and clearning etc.

(5) conclusion you can cite some recent references related to Asian countries to support your research,

Dwivedi, R., Alrasheedi, M., Dwivedi, P. and Starešinić, B., 2022. Leveraging financial inclusion through technology-enabled services innovation: A case of economic development in India. International Journal of E-Services and Mobile Applications (IJESMA), 14(1), pp.1-13.

addressing above changes will make your work more visible. 

All the best

NA

Author Response

Response to Reviewer #2:

It is my privilege to read your work and I like the approach to carrying out the work. There are many studies about structure upgrades in China, green technological innovations using panel data over the years. Therefore, I have few observations and comments to incorporate;

Response：Thank you so much. We appreciate the opportunity to revise and further improve our paper. We have added relevant literature to the article and revised the manuscript as per your valuable suggestions using track changes. Please read our itemized response below.

Comment 1. Can the title be 'Role of Government in Green Finance, foreign direct investment, Technological Innovation, and Industrial Structure Upgrading: A Study of China Based on years panel data '. it makes easy that most information covered in the title.

Response 1: Thank you for the suggestion. We have no updated the title as “Role of Government in Green Finance, Foreign Direct Investment, Technological Innovation, and Industrial Structure Up-grading: Evidence from China.”

Comment 2. Introduction is okay.

Response 2: We appreciate your assessment that the introduction is satisfactory, and your remarks are greatly appreciated.

Comment 3. The literature review needs to be updated with recent publications: There are areas of FinTech adoption and Financial Inclusion that bring lots of flexibility and green ecology in the environment so adding these papers can be helpful.

Response 3: Thanks for your valuable suggestions. Based on your suggestion, we have added recent publications related to fintech and updated references. (Section 2.1)

Comment 4. The methodology of the research needs to be explained through flow diagram that can help readers to understand easily. Right from object to conclusion. Focus about panel data source and clearning etc.

Response 4: Thanks for your valuable suggestions. We have added a research method flowchart below the introduction, from the research object to the research conclusion. Please see figure 1.

Comment 5. conclusion you can cite some recent references related to Asian countries to support your research.

Response 5: We greatly appreciate your feedback. In response to your recommendation, we have incorporated recent references related to Asian countries to strengthen and support our research findings. Your input has been instrumental in enhancing the comprehensiveness and relevance of our conclusion section.

Author Response File: Author Response.pdf

Reviewer 3 Report

Thank you for a very interesting article.

I made a few comments in the manuscript that you can address.

Remember to first write out an abbreviation followed by the abbreviation in brackets.

I am missing how your results compare to other studies. You only mention your own results without linking them to other prior research. Do your results agree with or contradict other studies?

Comments for author File: Comments.pdf

Minor language errors were made and indicated in the manuscript.

Author Response

Response to Reviewer #3:

Thank you for a very interesting article. I made a few comments in the manuscript that you can address.

Response： Thank you so much. We appreciate the opportunity to revise and further improve our paper. We have revised the manuscript as per your valuable suggestions using track changes. Please read our itemized response below.

Comment 1. Remember to first write out an abbreviation followed by the abbreviation in brackets.

Response 1: Thank you for pointing out this problem in the manuscript. In accordance with the reviewer's guidance, we diligently ensure that all abbreviations are initially written out in full, followed by the corresponding abbreviation enclosed within brackets.

Comment 3. I am missing how your results compare to other studies. You only mention your own results without linking them to other prior research. Do your results agree with or contradict other studies?

Response 3: Thanks for your valuable suggestions. Based on your suggestion, we have added content in the results section regarding the connection between the research results of this article and other studies. Our research results are consistent with previous research.

Author Response File: Author Response.pdf

Round 2

Reviewer 1 Report

Thank you improving the paper based on the comments.

proof reading might be necessary.

Reviewer 3 Report

Thank you for taking the time to address my concerns.

My last suggestion is to change "significant contribution" to "valuable contribution"