The effect of issuing green bonds on peer companies’ green innovation: evidence from Chinese listed companies

Purpose Promoting the sustainable, environmentally friendly and high-quality development of businesses has emerged as a crucial and pressing research topic in light of the dual carbon goals and to synergize the reduction of pollution and carbon emissions. Research has shown that corporations can encourage their green innovation by issuing green bonds, but it hasn’t looked at how issuing green bonds affects peer companies – companies that fall within the fourth level of the 2021 CSI Industry Classification Standard (CICS) – to engage in green innovation. The purpose of this paper is to examine how businesses might encourage green innovation among their peers by issuing green bonds, offering a theoretical framework for attaining the industry’s overall sustainable green development. Design/methodology/approach The research sample for this paper consists of Chinese A-share listed enterprises from 2012 to 2020. It uses the Staggered Difference-in-Differences (Staggered DID) to examine whether issuing green bonds can encourage peer companies to engage in green innovation. Findings Research reveals that corporate issuance of green bonds can greatly raise green innovation among peer companies. The results of the mechanism analysis report that the issuance of green bonds can encourage peer companies’ green innovation by enhancing their management’s green perception level, research and development (R&D) investment level and green investor attention. Heterogeneity analysis shows that green bond issuance can more effectively boost green innovation in nonstate-owned, large and monopolistic peer companies. Further analysis illustrates that companies issuing green bonds have the power to increase the green innovation level of other companies operating in the same prefecture-level city; however, it will not support nongreen innovation in peer companies or the same prefecture-level city, so validating the green characteristic of the green bond issue. Research limitations/implications Research findings can become more broadly applicable by using data from nonlisted companies. However, this study was unable to collect data from nonlisted companies for research purposes due to data gathering limitations. Researchers are therefore invited to test the presented hypotheses further after gathering pertinent research data. Practical implications This study has practical implications. It points out new channels to promote companies’ green innovation. Social implications This study expands the microhorizons of the effects of green bond issuance by businesses. It offers a novel avenue for resolving the real-world issue of low efficiency in green innovation. Originality/value This study can strengthen the micro foundation of the relationship between green bonds and green innovation, providing empirical evidence for advancing the green transformation of development modes via green finance.