Government-led green finance and enterprise green transformation: an empirical study of China’s government green fund policy

The Government Green Fund (GGF) has emerged as an important policy instrument for promoting green and low-carbon development and advancing the broader green transformation of the economy and society. Using a sample of Chinese A-share listed firms from 2010 to 2022, this study manually collects firm-level GGF data and employs a difference-in-differences (DID) approach to evaluate the impact of GGF on enterprise green transformation (EGT). The results indicate that GGF significantly promotes EGT. Further channel analyses suggest that the effect of GGF is consistent with two potential channels: green signalling and the alleviation of financing constraints. Heterogeneity analysis further reveals that the effect of GGF on EGT is more pronounced among firms in non-heavily polluting industries, non-state-owned enterprises, and non-growth-stage firms. Furthermore, GGF has a significantly stronger effect in regions with greater government fundraising capacity, and its positive effect on EGT is statistically more significant in regions with lower government environmental attention. In addition, GGF has a stronger effect in non-key support industries. Accordingly, efforts should be made to improve the incentive compatibility mechanism of GGF investment and to implement differentiated investment strategies to enhance the efficiency of capital allocation.