Which Subsidy Mode Improves the Financial Performance of Renewable Energy Firms? A Panel Data Analysis of Wind and Solar Energy Companies between 2009 and 2014

Huiming Zhang, Yu Zheng, Dequn Zhou and Peifeng Zhu
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Huiming Zhang: China Institute of Manufacturing Development & College of Economics and Management, Nanjing University of Information Science & Technology, Nanjing 210044, China
Dequn Zhou: Research Centre for Soft Energy Sciences, Nanjing University of Aeronautics and Astronautics, Nanjing 211100, China
Peifeng Zhu: College of Economics and Management, Nanjing University of Chinese Medicine, Nanjing 210023, China

Sustainability, 2015, vol. 7, issue 12, 1-13

Abstract: The effectiveness of subsidies in improving the performance of renewable energy firms has aroused significant research attention in recent years. As subsidy modes may affect corporate financial performance,we have chosen companies specializing in wind and solar energy in the Shanghai and Shenzhen stock markets as samples.The relationships between the subsidy modes and financial performance of these two types of companies are investigated with a panel data model. Results of the total sample indicate that both indirect and non-innovative subsidy have significant effects on the financial performance of renewable energy companies. The regressive coefficient of the former,however, is a negative value, which illustrates that taxation, bonus, and other market-based mechanisms impair corporate profitability. Moreover, the influence of innovative subsidy is weak, which means that the subsidy used for research and development, technical demonstration, and other innovations of renewable energy enterprises have failed to effectively enhance corporate financial performance. In terms of sub-industries, the direct subsidy for wind energy companies has achieved a significant effect. Incomparison, the indirect subsidy and innovative subsidy acquired by solar energy companies have notably reduced corporate profitability. Thissuggests an urgent reform of subsidy policy for this industry is needed. The government should consider differences in the effects subsidies have for wind and solar energy companies when improving subsidy policy. In addition, market-based subsidy mechanisms should be perfected, and the structure of innovative subsidies should be ameliorated.

Keywords: renewable energy; subsidy mode; financial performance; panel data model (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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