Economic Policy Uncertainty and Corporate Green Technology Innovation—Evidence from Privately Listed Companies in China

Green technology innovation (GTI) is an important way for enterprises to promote technological progress and enhance their market competitiveness. As investment in R and D and innovation is a high-risk, long-term investment project with high sensitivity to relevant policies, increases or drastic fluctuations in economic policy uncertainty (EPU) may have a strong impact on technological innovation. Therefore, it is necessary to examine how EPU affects GTI. In contrast to studies that have focused on the impacts of EPU on GTI in developed countries or state-owned firms in China, this study uses the mediating effect panel fixed effect model to investigate the impacts of EPU on corporate GTI and its mechanisms, based on data from China’s Shanghai and Shenzhen A-share private manufacturing listed companies from 2013 to 2022. The results indicate that an increase in EPU has a positive impact on the GTI of private enterprises and that the impact is stronger in companies with multiple major shareholders, those purchasing directors’ and officers’ liability insurance, and those with stricter environmental regulations. This conclusion remains valid after robustness checks and instrumental variable tests. Mechanism tests reveal that the increase in EPU indirectly promotes GTI by forcing private enterprises to avoid short-sighted management tendencies, increase risk-taking levels, boost environmental protection investments, and strengthen internal controls. For example, EPU will lead to increased investment in green protection, meaning that private companies are more willing to promote green transformation and market competitiveness through innovative activities. These findings provide a reference for the Chinese government to formulate targeted environmental regulation policies and financing policies to guide the green transformation of businesses; they also provide insights for enterprises in other developing countries to cope with economic policy risks and promote green technological advancement.