From policy to performance: green subsidies and knowledge-based pathways to corporate sustainability

Abstract

Purpose This study aims to examine the relationships between government green subsidies and two distinct outcomes relevant to corporate sustainability: corporate financial performance and disclosure-based corporate environmental performance. It also assesses whether green technology innovation represents a proposed knowledge-based intermediary pathway and whether disclosed digital-transformation orientation and media coverage condition the observed relationships. Design/methodology/approach Using 30,485 firm-year observations from Chinese A-share-listed firms (2013–2023), the study estimates firm- and year-fixed-effects models. A two-step mechanism test examines the proposed pathway, while interaction models assess the boundary conditions. Instrumental-variable estimation, Heckman selection correction, lagged subsidies and alternative measures provide sensitivity checks. Findings Green subsidy intensity is positively associated with Tobin’s Q, disclosure-based corporate environmental performance, and green patent output. The coefficient pattern is consistent with the proposed intermediary pathway through green technology innovation but does not identify a formal or causal indirect effect. Positive interaction terms indicate that the observed associations are stronger at higher levels of disclosed digital-transformation orientation and media coverage. The results remain qualitatively consistent across the reported sensitivity checks, which do not establish causal identification. Originality/value The study distinguishes external policy resources, underlying knowledge activities, granted green patent output, and value realization. Its central contribution is a capacity–accountability framework in which the observed relevance of green subsidies varies with disclosed digital-transformation orientation and media-based accountability.