Does climate policy uncertainty impair or improve corporate investment efficiency?

Qiubin Huang and Mingting Kou

Economics Letters, 2024, vol. 244, issue C

Abstract: Climate policy uncertainty (CPU) has been a topical issue given its widespread impacts, but its effect on corporate investment efficiency is arguable. Based on a sample of Chinese listed firms, we find that higher CPU results in lower investment levels while higher investment sensitivity to investment opportunities. This suggests that CPU improves investment efficiency by pushing firms to reduce investment expenditures and align their investment decisions more in line with investment opportunities. We name this finding as the pushback effect of CPU and find that it is more pronounced for firms with overinvestment or tight financial conditions.

Keywords: Climate policy uncertainty; Investment efficiency; Corporate investment (search for similar items in EconPapers)
JEL-codes: G31 Q54 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:244:y:2024:i:c:s0165176524004993

DOI: 10.1016/j.econlet.2024.112015

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