Financial stability and corporate carbon emissions: Evidence from China

In recent years, financial stability and corporate carbon emissions have attracted a lot attention in China, especially in the context of China's efforts to achieve the goals of “peak carbon” and “carbon neutrality”. This paper focuses on the impact of financial stability on corporate carbon emissions and its mechanism, as well as the moderating role of digital transformation and the mediating role of green innovation. This paper does the empirical research using panel data of Chinese A-share listed companies from 2008 to 2021 as sample. The results show that financial stability significantly reduces corporate carbon emissions and digital transformation strengthens the role of financial stability on corporate carbon emissions reduction. These two results still hold after the robustness test. The results of the mechanism test show that financial stability effectively reduces corporate carbon emissions by promoting green innovation. In addition, the heterogeneity analysis further reveals that the stability of macroeconomics and financial markets has a significant effect on the reduction of corporate carbon emissions, while the stability of financial institutions and international environment has an insignificant effect on the reduction of corporate carbon emissions. It is also found that there is an inverted U-shaped correlation between corporate carbon emissions and their economic value added. Finally, this paper proposes relevant policy recommendations to enhance financial stability as well as to promote corporate carbon emissions reduction. The findings of this paper provide an important reference for the formulation of emission reduction strategies from the perspective of financial stability.