Preemptive Move or Wait-and-See? Climate Policy Uncertainty and Equity Financing of SRDI Enterprises in China

Rising climate policy uncertainty increases the complexity of firms’ financing decisions, particularly for Specialized, Refinement, Differential, and Innovation (SRDI) enterprises that rely heavily on external financing. Accordingly, using data on 262 SRDI firms from 2011 to 2023, this paper conducts empirical analysis to systematically examine the relationship between climate policy uncertainty and SRDI firms’ equity financing decisions. We find a significant inverted U-shaped relationship between climate policy uncertainty and the equity financing ratio of SRDI firms. When uncertainty is low to moderate, firms are more inclined to raise the proportion of equity financing to preemptively lock in capital; however, as uncertainty rises further, valuation discounts and financing frictions intensify, thereby suppressing equity financing. These conclusions remain unchanged after a series of robustness checks. Mechanism tests indicate that climate policy uncertainty affects equity financing mainly through two channels: higher debt financing costs and lower firm value. The former encourages substitution from debt-to-equity financing, whereas the latter suppresses equity financing by increasing its implicit costs. Further heterogeneity analyses show that this effect is more pronounced among private firms, firms in more highly concentrated industries, and firms with weaker risk resilience. Our findings inform innovative firms’ financing decisions and sustainable development under climate policy uncertainty.