Abstract：Different from previous studies on hard regulation of government environmental regulation, this paper focuses on how market soft supervision intervenes in corporate green innovation. Taking advantage of the exogenous impact of the third-party SynTao Green Finance's first release of the ESG rating, this paper adopts a difference-in-differences model to examine the impact of soft market supervision on green innovation caused by companies listed on the ESG rating. The results show that third party ESG rating forces the listed companies to increase the number of short-term green innovations, but reduce the quality of long-term green innovations. This shows that enterprises have adopted a formalistic behavior of "emphasis on quantity and light on quality" in order to cater to market preferences, which intensified the "bubble" of green innovation. Further research found that managers' myopia psychology is the potential influence mechanism between the soft supervision of ESG rating and the formalistic behavior of enterprises' green innovation. The cross-sectional grouping found that higher level of corporate governance and analyst attention can correct the formalism of green innovation by restraining the internal cause of managers' short-sighted self-interest and the external cause of information asymmetry. Finally, market soft supervision has significant spillover effects, that is, the number of green patent applications by companies in the same province and in the same industry has also increased, but the negative spillover effect of the quality of green patent applications only exists in enterprises in the same province. This article not only proves the role of soft market supervision in the environmental and economic dilemma, but also provides a reference for China's financial regulators to implement hard supervision policies for ESG information disclosure.

Keyword：soft market supervision; ESG rating; green innovation; formalism; managerial myopia;