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Does climate policy uncertainty impair or improve corporate investment efficiency?

Author

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  • Huang, Qiubin
  • Kou, Mingting

Abstract

Climate policy uncertainty (CPU) has been a topical issue given its widespread impacts, but its effect on corporate investment efficiency is arguable. Based on a sample of Chinese listed firms, we find that higher CPU results in lower investment levels while higher investment sensitivity to investment opportunities. This suggests that CPU improves investment efficiency by pushing firms to reduce investment expenditures and align their investment decisions more in line with investment opportunities. We name this finding as the pushback effect of CPU and find that it is more pronounced for firms with overinvestment or tight financial conditions.

Suggested Citation

  • Huang, Qiubin & Kou, Mingting, 2024. "Does climate policy uncertainty impair or improve corporate investment efficiency?," Economics Letters, Elsevier, vol. 244(C).
    • Handle: RePEc:eee:ecolet:v:244:y:2024:i:c:s0165176524004993
    DOI: 10.1016/j.econlet.2024.112015
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    More about this item

    Keywords

    Climate policy uncertainty; Investment efficiency; Corporate investment;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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