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How does climate policy uncertainty affect the investment efficiency of energy firms?

Author

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  • Feng, Yanhong
  • Liu, Fei
  • Liu, Hongbo
  • Xuan, Linlin

Abstract

The strategic response of energy firms to climate policy uncertainty (CPU) in investment decisions critically shapes the global energy transition. Employing fixed-effects models on a sample of China’s A-share listed energy companies (2009–2023), this study examines CPU’s impact on investment efficiency (IE). Key findings reveal: CPU exerts a significant overall inhibitory effect on IE, primarily manifested as underinvestment; This occurs through two independent mechanisms: first, by distorting investment valuation through heightened stranded asset risk perception, and second, by constraining investment capacity through intensified defensive risk asset allocation; Heterogeneity tests confirm a significantly stronger inhibitory effect of CPU on IE in firms with high financing constraints, new energy firms, and traditional energy firms undergoing high green transition.

Suggested Citation

  • Feng, Yanhong & Liu, Fei & Liu, Hongbo & Xuan, Linlin, 2025. "How does climate policy uncertainty affect the investment efficiency of energy firms?," Finance Research Letters, Elsevier, vol. 86(PE).
    • Handle: RePEc:eee:finlet:v:86:y:2025:i:pe:s1544612325020264
    DOI: 10.1016/j.frl.2025.108772
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    Cited by:

    1. Wu, Jiaying & Yang, Yu, 2025. "Intellectual property protection and corporate investment efficiency: An analysis of the moderating effect based on financial technology transfer," Finance Research Letters, Elsevier, vol. 84(C).

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