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How Does Climate Policy Uncertainty Affect Excessive Corporate Debt? The Case of China

Author

Listed:
  • Xiaohang Ren

    (School of Business, Central South University, Changsha 410083, P. R. China)

  • Jianing Qin

    (School of Business, Central South University, Changsha 410083, P. R. China)

  • Kangyin Dong

    (��School of International Trade and Economics, University of International Business and Economics, Beijing 100029, P. R. China)

Abstract

This paper explores the direct and indirect relationship between climate policy uncertainty and excessive corporate debt, and focuses on the moderating effect of financing constraints. We use the climate policy uncertainty index to represent climate policy uncertainty, and use the Kaplan and Zingales (KZ) index to represent financing constraints. Our study employs data from Chinese non-financial listed companies for the period 2007–2020. The results show that climate policy uncertainty not only directly curbs excessive debt, but also indirectly reduces excessive debt by increasing financing constraints. This direct weakening effect is more pronounced in non-state-owned enterprises, high-tech enterprises, and high-carbon enterprises. Moreover, the financing constraints channel is more effective in state-owned enterprises, high-tech enterprises, and high-carbon enterprises. Furthermore, due to the actual situation in China, the direct weakening effect of climate policy uncertainty is very obvious in the central region, while the indirect effect through the financing constraints channel is most obvious in the western region. These empirical findings will help policymakers, managers, and financial institutions to reconsider financing risk under climate policy uncertainty.

Suggested Citation

  • Xiaohang Ren & Jianing Qin & Kangyin Dong, 2022. "How Does Climate Policy Uncertainty Affect Excessive Corporate Debt? The Case of China," Journal of Environmental Assessment Policy and Management (JEAPM), World Scientific Publishing Co. Pte. Ltd., vol. 24(02), pages 1-36, June.
    • Handle: RePEc:wsi:jeapmx:v:24:y:2022:i:02:n:s1464333222500259
    DOI: 10.1142/S1464333222500259
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    Citations

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    Cited by:

    1. Zhang, LiXia & Baloch, Zulfiqar Ali & Niu, Guangli, 2023. "Effects of COVID-19 on green bonds, renewable power stocks, and carbon markets: A dynamic spillover analysis," Renewable Energy, Elsevier, vol. 216(C).
    2. Bi, Mingxiong, 2023. "Impact of COVID-19 on environmental regulation and economic growth in China: A Way forward for green economic recovery," Economic Analysis and Policy, Elsevier, vol. 77(C), pages 1001-1015.
    3. Wang, Yunxian & Wang, Xin & Zhang, Zheng & Cui, Zhanmin & Zhang, Yuan, 2023. "Role of fiscal and monetary policies for economic recovery in China," Economic Analysis and Policy, Elsevier, vol. 77(C), pages 51-63.
    4. Dong, Chunlong & Wu, Hao & Zhou, Jianwen & Lin, Huifang & Chang, Lei, 2023. "Role of renewable energy investment and geopolitical risk in green finance development: Empirical evidence from BRICS countries," Renewable Energy, Elsevier, vol. 207(C), pages 234-241.
    5. Ma, Mengjuan & Zhu, Xiao & Liu, Meishan & Huang, Xiaodong, 2023. "Combining the role of green finance and environmental sustainability on green economic growth: Evidence from G-20 economies," Renewable Energy, Elsevier, vol. 207(C), pages 128-136.
    6. Jianhe Wang & Mengxing Cui & Lei Chang, 2023. "Evaluating economic recovery by measuring the COVID-19 spillover impact on business practices: evidence from Asian markets intermediaries," Economic Change and Restructuring, Springer, vol. 56(3), pages 1629-1650, June.
    7. Shuang Cai, 2023. "Impact of digitization on green economic recovery: an empirical evidence from China," Economic Change and Restructuring, Springer, vol. 56(5), pages 3139-3161, October.

    More about this item

    Keywords

    Climate policy uncertainty; financing constraints; excessive corporate debt; moderating effect;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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