Green Finance Policy, Supply Chain Spillover and Pollution Reduction: Evidence from Quasi-Natural Experiment in China

As a pioneering initiative in the advancement of green finance, China’s Green Finance Reform and Innovation Pilot Zone (GFPZ) offers critical empirical and theoretical insights for the development of a global green financial system. While existing studies highlight the GFPZ’s role in promoting pollution reduction within designated regions, it remains unclear whether its effects extend along supply chains. Exploiting the GFPZ policy as a quasi-natural experiment and employing a difference-in-differences (DID) approach, this study uses panel data from A-share listed companies on the Shanghai and Shenzhen stock exchanges in China from 2013 to 2021 to assess its impact. The findings reveal the following: (1) The GFPZ significantly reduces emissions not only among focal heavily polluting firms but also across their upstream and downstream partners. (2) The primary transmission channel is a financing penalty spillover, whereby the policy intensifies financing constraints and reduces credit access for supply chain firms, compelling them to scale down operations. Notably, the evidence does not support the presence of a Porter effect. (3) Heterogeneity analysis indicates that the spillover effect is more pronounced among upstream suppliers and firms with stronger green capacities, while excessive government subsidies tend to weaken the transmission of policy impacts.