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Does carbon emission trading policy induce financialization of non-financial firms? Evidence from China

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  • Zhang, Xiaoliang
  • Zheng, Xiaojia

Abstract

The carbon emission trading scheme influences firms’ operation costs, which may induce resource diversion to financial investments. By using a sample of Chinese A-share non-financial listed firms that are subject to carbon emission trading pilot programs in China, this paper employs a differences-in-differences analysis to test the impact of carbon emission trading on firms’ financial asset allocation. We find that carbon emission trading significantly increases corporate financialization, especially long-term financial assets. The effect is stronger in firms with stronger profit-seeking incentives and weaker governance, suggesting the mechanism of capital profit-seeking and management opportunism under increased operation costs and risk. Further heterogeneity analysis indicates that the positive association between carbon emission trading and corporate financialization is more pronounced in non-state-owned enterprises, carbon-intensive firms, and firms in regions with developed financial markets or more volatile carbon markets.

Suggested Citation

  • Zhang, Xiaoliang & Zheng, Xiaojia, 2024. "Does carbon emission trading policy induce financialization of non-financial firms? Evidence from China," Energy Economics, Elsevier, vol. 131(C).
    • Handle: RePEc:eee:eneeco:v:131:y:2024:i:c:s0140988324000240
    DOI: 10.1016/j.eneco.2024.107316
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    More about this item

    Keywords

    Carbon emission trading; greenhouse gases; environmental regulations; corporate financialization;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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