Does Green Finance Promote Green Development? Examining the Mechanisms of Green Innovation and Environmental Decentralization

This study examines whether green finance promotes green development across Chinese prefecture-level cities from 2005 to 2019. We find a positive association between green finance and green development using panel regressions with city and year fixed effects. This result remains robust after accounting for potential endogeneity and implementing a series of robustness checks. Further heterogeneity analysis shows that this positive effect is stronger in regions characterized by high fiscal capacity and within the Yangtze River Economic Belt. Additionally, green finance drives regional green development by promoting green innovation. Environmental decentralization moderates the relationship, with a stronger positive effect at higher levels of decentralization. This study offers empirical evidence regarding how green finance shapes green development outcomes.