The Impact of Capital Structure on Corporate Green Innovation: An Empirical Study Based on the Quantity-efficiency Paradox

Research Article
Open access

The Impact of Capital Structure on Corporate Green Innovation: An Empirical Study Based on the Quantity-efficiency Paradox

Xinzhu Li 1*
  • 1 China Agricultural University    
  • *corresponding author 2022311320309@cau.edu.cn
AEMPS Vol.192
ISSN (Print): 2754-1177
ISSN (Online): 2754-1169
ISBN (Print): 978-1-80590-195-2
ISBN (Online): 978-1-80590-196-9

Abstract

This study empirically examines the dual impact of capital structure on corporate green innovation, focusing on the "quantity-efficiency paradox" in Chinese A-share non-financial firms (2000–2023). Leveraging panel data and robust econometric models, we find that higher leverage ratios significantly increase green innovation output (measured by patent applications) but simultaneously reduce efficiency (patent-to-revenue ratio). This paradox arises because debt financing expands R&D scale yet distorts resource allocation, undermining commercialization efficacy. Mechanism tests reveal that R&D intensity mediates the positive effect of leverage on innovation output, while diminished financial flexibility exacerbates efficiency losses. Heterogeneity analysis shows state-owned enterprises (SOEs) experience stronger output gains but steeper efficiency declines compared to private firms, attributed to SOEs’ policy advantages but bureaucratic inefficiencies. Our findings advance green innovation theory by decoupling its dual dimensions and highlighting capital structure’s conflicting roles. Practically, the results urge firms to balance debt levels with financial flexibility to optimize green innovation. Policymakers should incentivize R&D investments while improving financing mechanisms to mitigate efficiency trade-offs. Robustness checks—including alternative proxies, fixed effects, and subsample analyses—confirm result reliability. This study bridges corporate finance and sustainability literature, offering actionable insights for achieving both scale and efficacy in green transitions.

Keywords:

Capital structure, Green innovation, "quantity-efficiency" paradox

Li,X. (2025). The Impact of Capital Structure on Corporate Green Innovation: An Empirical Study Based on the Quantity-efficiency Paradox. Advances in Economics, Management and Political Sciences,192,89-98.
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References

[1]. Toft. L K B , Leland H E .Optimal Capital Structure, Endogenous Bankruptcy, and the Term Structure of Credit Spreads[J]. 1995.

[2]. Dumitrescu A .Valuation of defaultable bonds and debt restructuring[J].Ufae & Iae Working Papers, 2007, 13(1):94-111.

[3]. Singh M , Faircloth S .The impact of corporate debt on long term investment and firm performance[J].Applied Economics, 2005, 37(8):875-883.

[4]. Zhang Q, Kang N .Issuing green bonds and corporate green innovation: Empirical evidence from China's listed energy companies[J].Wuhan Finance, 2023, (02):65-71.

[5]. Shi B, Chang Q .Research on the Mechanism and Effect of Empowering Green Innovation through Enterprise Digital Transformation[J].Economic Management, 2024, 46 (11): 67-88

[6]. Barbera A J , Mcconnell V D .The impact of environmental regulations on industry productivity: Direct and indirect effects[J].Journal of Environmental Economics and Management, 1990, 18.

[7]. Wu W, Liu J, Zhang A, Qin Z .Green Concerns and Corporate Green Innovation: A Scenario Study of Digital Business Models in the Context of Quality Development Orientation[J].Science and Technology Progress and Countermeasures, 2023, 40 (10): 36-47.

[8]. Zheng Z, Xu Y .Carbon emission trading mechanism, family control and green innovation efficiency[J].China Environmental Management, 2023; For - 66.

[9]. Dong Z , Wang J .Does public data access stimulate the efficiency of corporate green innovation?[J].Finance Research Letters, 2024, 65.

[10]. Wang X, Wang M .Research on the efficiency and influencing factors of green innovation in manufacturing industry: an analysis based on super efficiency SBM-Tobit model[J/OL].Business and Management, 1-12[2025-05-10].

[11]. Li Q, Xiao Z .Heterogeneous environmental regulation tools and corporate green innovation incentives: evidence from listed companies' green patents[J].Economic Research Journal, 2020, 55 (09): 192-208.

[12]. Li X, Tang Y, Yang J .The impact of carbon emission trading on corporate green innovation efficiency[J].Investment and Cooperation, 2024, (11): 167-170.

Cite this article

Li,X. (2025). The Impact of Capital Structure on Corporate Green Innovation: An Empirical Study Based on the Quantity-efficiency Paradox. Advances in Economics, Management and Political Sciences,192,89-98.

Data availability

The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.

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About volume

Volume title: Proceedings of ICMRED 2025 Symposium: Effective Communication as a Powerful Management Tool

ISBN：978-1-80590-195-2(Print) / 978-1-80590-196-9(Online)
Editor：Lukáš Vartiak
Conference website: https://2025.icmred.org/Bratislava.html
Conference date: 30 May 2025
Series: Advances in Economics, Management and Political Sciences
Volume number: Vol.192
ISSN：2754-1169(Print) / 2754-1177(Online)

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References

[1]. Toft. L K B , Leland H E .Optimal Capital Structure, Endogenous Bankruptcy, and the Term Structure of Credit Spreads[J]. 1995.

[2]. Dumitrescu A .Valuation of defaultable bonds and debt restructuring[J].Ufae & Iae Working Papers, 2007, 13(1):94-111.

[3]. Singh M , Faircloth S .The impact of corporate debt on long term investment and firm performance[J].Applied Economics, 2005, 37(8):875-883.

[4]. Zhang Q, Kang N .Issuing green bonds and corporate green innovation: Empirical evidence from China's listed energy companies[J].Wuhan Finance, 2023, (02):65-71.

[5]. Shi B, Chang Q .Research on the Mechanism and Effect of Empowering Green Innovation through Enterprise Digital Transformation[J].Economic Management, 2024, 46 (11): 67-88

[6]. Barbera A J , Mcconnell V D .The impact of environmental regulations on industry productivity: Direct and indirect effects[J].Journal of Environmental Economics and Management, 1990, 18.

[7]. Wu W, Liu J, Zhang A, Qin Z .Green Concerns and Corporate Green Innovation: A Scenario Study of Digital Business Models in the Context of Quality Development Orientation[J].Science and Technology Progress and Countermeasures, 2023, 40 (10): 36-47.

[8]. Zheng Z, Xu Y .Carbon emission trading mechanism, family control and green innovation efficiency[J].China Environmental Management, 2023; For - 66.

[9]. Dong Z , Wang J .Does public data access stimulate the efficiency of corporate green innovation?[J].Finance Research Letters, 2024, 65.

[10]. Wang X, Wang M .Research on the efficiency and influencing factors of green innovation in manufacturing industry: an analysis based on super efficiency SBM-Tobit model[J/OL].Business and Management, 1-12[2025-05-10].

[11]. Li Q, Xiao Z .Heterogeneous environmental regulation tools and corporate green innovation incentives: evidence from listed companies' green patents[J].Economic Research Journal, 2020, 55 (09): 192-208.

[12]. Li X, Tang Y, Yang J .The impact of carbon emission trading on corporate green innovation efficiency[J].Investment and Cooperation, 2024, (11): 167-170.

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