Does China's emission trading scheme affect corporate financial performance: Evidence from a quasi-natural experiment

Baoju Chu, Yizhe Dong, Yaorong Liu, Diandian Ma and Tianju Wang

Economic Modelling, 2024, vol. 132, issue C

Abstract: Taking China's emissions trading system (ETS) pilots as a quasi-natural experiment, we examine how the ETS affects firms' financial performance. Previous studies highlight the impact of ETS on regional and industrial development; however, few studies focus on its potential impact on firms' performance. Using a time-varying difference-in-differences model and data on Chinese listed firms from 2008 to 2020, we find that the ETS pilots have significant positive impacts on firms' profitability and value and a negative impact on operating costs. We also find that the ETS pilots improve total factor productivity, but the technological changes indirectly suppress the relation between the ETS and financial performance. Finally, we find evidence that state-owned enterprises experience more significant improvements in their financial performance, led by ETS participation. Our findings have policy implications for firms' sustainable development and the transition to a low-carbon economy.

Keywords: Emission trading scheme; Corporate financial performance; Carbon emission; Low Carbon Transition; China (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:132:y:2024:i:c:s0264999324000142

DOI: 10.1016/j.econmod.2024.106658

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