An economic analysis of government subsidies and environmental penalties on corporate green investment decisions

Under the global dual carbon goals, the linkage between environmental regulation and corporate green transformation has become a core issue for sustainable development worldwide. Using data of A-share listed companies in Shanghai and Shenzhen from 2010 to 2023, this study employs an empirical model of firm-level panel fixed-effects regression to examine the impact of Chinese government subsidies and environmental penalties on corporate green investment. The findings reveal three key results: first, special environmental subsidies significantly and positively promote corporate green investment; second, the inhibitory effect of environmental penalties on green investment only exists in state-owned enterprises (SOEs), while exerting a positive incentive effect on non-state-owned enterprises (non-SOEs); third, there is a synergistic effect between the two policies—government subsidies can weaken the negative impact of environmental penalties on SOEs. Grounded in the context of China's transitional economy, this study provides empirical evidence from emerging markets, which holds significant practical value for promoting the green transformation of global enterprises and facilitating the achievement of the United Nations Sustainable Development Goals (SDGs).