Research on the Relationship between Short Selling Mechanism and Enterprise Green Innovation

Abstract

With the achievement of the "dual carbon" goals and the continuous improvement of capital market innovations, fostering a strong momentum for green innovation in enterprises via market mechanisms has become an important issue in promoting high-quality economic growth and driving green low-carbon transition. This study investigates A-share listed companies in China from 2010 to 2024, takes advantage of the quasi-natural experiment created by the introduction of incremental margin trading and short-selling initiatives, and builds a multi-period difference-in-differences model to explore the causal effect of short-selling systems on corporate green innovation and investigate various forms and internal mechanisms of this effect. The results indicate that relaxing restrictions on short selling has promoted the development of corporate green innovation by increasing the amount and quality of innovation; at the same time, the main ways this is achieved are through improved information efficiency, a reduction in agency costs, and relief of financing constraints. This study addresses the lack of research at the intersection of relevant disciplines and offers empirical support for improving the margin trading and short-selling system, as well as building a market-based green innovation incentive mechanism.