Climate Policy Uncertainty and Enterprise Working Capital Management Efficiency

This study explores the effect of climate policy uncertainty on corporate working capital management efficiency. Investigating this problem may provide advice to mitigate the impact of climate policy uncertainty on firms. We used Chinese A-share listed companies’ data, spanning from 2007 to 2023, and discovered that climate policy uncertainty reduced companies’ working capital management efficiency. Mechanism research found that climate policy uncertainty reduced firms’ working capital management efficiency by increasing the transaction costs, lowering specific asset investment, and increasing inventory turnover days. Furthermore, our heterogeneity analysis indicated that the impact of climate policy uncertainty on working capital management efficiency was more pronounced in enterprises in the western and central regions, areas with lower marketization levels, and regions with lower highway density. By exploring the influence of climate policy uncertainty on working capital management efficiency, we have expanded the understanding of how climate policy uncertainty affects corporations and enriched research about corporate working capital management efficiency. We recommend that the government enhance the transparency of climate policies and reduce the frequency of policy changes. Furthermore, we advise enterprises to maintain close relationships with their customers and suppliers to mitigate the impact of climate policy uncertainty on working capital management efficiency.