Subsidy expiration and green innovation: Does external financing have a role?

Government subsidy encourages green innovation by providing financial support and certification effect. However, once the subsidy expires, these advantages disappear, which could adversely affect green innovation. This paper takes listed industrial enterprises from 2011 to 2021 as a sample to study the relationship between subsidy expiration and green innovation. First, subsidy expiration significantly inhibits green innovation. This is mainly achieved by reducing R&D investment. Equity financing can alleviate the negative correlation between subsidy expiration and green innovation. Debt financing does not have this effect. Finally, enterprises will not invest the funds raised by equity financing into the research and development process but increase the number of green innovations through strategic innovation so as to carry out "greenwashing" activities. Three robustness tests all show that our results are valid.