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How Does Climate Policy Uncertainty Affect Green Innovation Among Chinese Companies?

Author

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  • Aonan Chen

    (School of Economics and Management, Hefei University, Hefei 230601, China)

  • Jingwen Feng

    (School of Economics and Management, Hefei University, Hefei 230601, China)

  • Yangyang Cheng

    (School of Economics and Management, Wuhan University, Wuhan 430072, China)

Abstract

Climate change is a major challenge for humanity, with important implications for corporate development. Based on the data of China’s A-share listed companies from 2000 to 2021, this study evaluates the impact of climate policy uncertainty (CPU) on firms’ green innovation using a two-way fixed-effects model. It is found that CPU inhibits firms’ green innovation by reducing government support and external investment, with corporate green innovation declining by 3.3% for each unit increase in CPU. The mechanism studies reveal that CPU has impeded corporate green innovation by reducing corporate social responsibility and increasing corporate financing constraints. The heterogeneity analyses indicate that the negative effect of CPU was more noticeable in state-owned enterprises (SOEs), heavily polluting firms, and firms with a high equity concentration. Further exploration of the economic consequences suggests that CPU has weakened enterprise market competitiveness, including market share, market value, and management efficiency. Climate policy uncertainty is an important external factor for sustainable development, and this paper discusses the impact of climate policy uncertainty on corporate green innovation, which can help to realize the coordinated development of climate policy and corporate green innovation.

Suggested Citation

  • Aonan Chen & Jingwen Feng & Yangyang Cheng, 2025. "How Does Climate Policy Uncertainty Affect Green Innovation Among Chinese Companies?," Sustainability, MDPI, vol. 17(9), pages 1-19, April.
    • Handle: RePEc:gam:jsusta:v:17:y:2025:i:9:p:3857-:d:1641781
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    References listed on IDEAS

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    Cited by:

    1. Zhao, Lili & Fu, Chaoxia & Chen, Xiqun (Michael), 2025. "Integrating climate change attention into enterprise digital transformation: A managerial perspective," Finance Research Letters, Elsevier, vol. 82(C).
    2. Yang, Lulu & Peng, Zijia, 2025. "Trade policy uncertainty, political relations, and the survival performance of foreign-funded enterprises," Finance Research Letters, Elsevier, vol. 85(PE).
    3. Fan, Min & Shira, Ruba Khalid & Hunjra, Ahmed Imran & Zhao, Shikuan, 2025. "Climate governance actions, financing constraints, and green transformation of energy-intensive firms," Research in International Business and Finance, Elsevier, vol. 79(C).
    4. Ning, Zihao & Xu, Zhibo, 2026. "Climate policy uncertainty and corporate trade credit provision," Research in International Business and Finance, Elsevier, vol. 83(C).

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