SHADOW BANKING DEVELOPMENT AND GREEN INNOVATION IN SMES

This paper uses a three-way fixed effects model to empirically study the impact of shadow banking development on green innovation in small and medium-sized enterprises (SMEs) on the basis of a sample of companies listed on the Shenzhen Stock Exchange’s SME Board in China from 2013 to 2020. We find that the development of shadow banking promotes green innovation in SMEs by alleviating their financing constraints. Our study further reveals that external support is an important factor influencing green innovation in SMEs. In addition, from an environmental governance perspective, our study supports the notion that shadow banking development should be encouraged while its regulation should be strengthened.