Energy policy and corporate financial performance: Evidence from China's 11th five-year plan

The implementation of energy policies inevitably affects the micro-level behavior of enterprises, in turn affecting their financial performance. However, the relationship between China's energy policy and corporate financial performance remains to be verified. Combining of time, provincial difference in applying the binding energy-saving target in the 11th Five-Year Plan, and industry energy intensive variations, we employ a difference-in-difference-in-difference model to estimate the impact of energy policy on corporate financial performance. We find that in the high energy-intensive industries, stricter energy policy reduces corporate financial performance, as manifested by higher financial expense ratio, lower inventory turnover rate, and lower accounts receivables turnover ratio. In the eastern region, high energy-intensive enterprises within stricter energy policy provinces have higher financial expense ratio and lower inventory turnover ratio compared with similar enterprises in the central and western regions. Also, the energy policy has significant negative effect on the financial performance of large-scale enterprises and non-state-owned enterprises. Grasping this relationship is important for understanding the economic consequences of energy policy and helping the decisions-making of the Chinese government and regulated enterprises.