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

Green innovation is a key driver for promoting the construction of ecological civilisation and achieving the carbon neutrality goal. This paper explores the relationship between subsidy expiration and green innovation. The findings are as follows: First, subsidy expiration inhibits green innovation by reducing R&D investment. Second, equity financing can alleviate the negative impact of subsidy expiration on green innovation. Third, enterprises do not invest the funds raised through equity financing into the R&D process, but instead increase the quantity of green innovation through strategic innovation, with investor attention playing a mediating role in this process. In addition, heterogeneous analysis reveals that the impact of equity financing on strategic innovation is more significant in non-state-owned and non-heavily polluting enterprises. This study provides practical guidance for enterprises to rationally utilise equity financing after subsidies expiration, and also offers important references for policymakers to optimise the subsidy withdrawal mechanism and accurately support enterprises’ green innovation.