Leveraging Free Trade Zones for Corporate Green Transition: An Impact Assessment of China’s Institutional Innovations
Description
As pivotal institutional innovations, Free Trade Zones (FTZs) in China have significantly contributed to economic growth and innovation. However, their role in fostering corporate green transition (CGT) remains underexplored, particularly in the context of environmental governance and sustainability. This study investigates the impact of FTZs on CGT using a sample of China’s A-share listed companies from 2007 to 2021. Employing a staggered difference-in-differences approach, the research identifies a significant positive effect of FTZs on CGT, with an average increase in green transition of 8.6%. The findings reveal that this effect is more pronounced in less-polluting industries, enterprises with state-owned property, and located in environmental protection regions. The study highlights key mechanisms driving these impacts, including improved environmental disclosures, alleviated financing constraints, and reverse knowledge transfer. The study provides actionable policy recommendations, such as strengthening environmental disclosure regulations, attracting green foreign investments, and fostering outward green investments to amplify reverse knowledge transfer effects. These findings advance the literature on environmental governance, institutional openness, and green development, offering valuable guidance for policymakers and practitioners in leveraging FTZs for high-quality green development.