Abstract
This study develops a unified theoretical model that integrates environmental regulations, firm financialization, and green innovation. We utilize the increased pollution discharge fees in China as a quasi-natural experiment to assess the impact of environmental regulation. Our findings indicate that higher pollution discharge fees enhance both the quantity and quality of green patents. We identify an inverted U-shaped relationship between firm financialization and the quantity of green patents, where financialization initially promotes but subsequently weakens the enhancement of green patent quality. Further analysis reveals that increased pollution fees intensify firms' financialization tendencies. We discover that risk aversion motivation, by easing financial constraints, significantly boosts the quantity and quality of green patents. In contrast, speculative motivation tends to displace physical investment, negatively affecting green patent outcomes. Additionally, our results suggest that financial technology might substitute for traditional firm financialization practices, and that robust financial regulation can curb financialization to foster green innovation. Cities employing market-controlled policy tools appear more affected by financialization investment impacts.