Who does not advance loses ground: Green investment as a strategic response by small and medium-sized enterprises to economic policy uncertainty

Shuai Yue, Hamish D. Anderson and Jing Liao

Energy Economics, 2025, vol. 148, issue C

Abstract: This study examines how listed small and medium-sized enterprises (SMEs) respond to economic policy uncertainty (EPU exposure) through their environmental decisions. We find that SMEs are associated with increased environmental investment when facing heightened EPU exposure. Notably, SMEs with greater EPU exposure are more likely to invest in clean energy-related initiatives, underscoring the important role of the energy sector in driving corporate sustainable strategies. Additionally, this study reveals that the impact of EPU exposure on environmental investments is more salient when SMEs face fewer financial constraints, are located in more marketized regions, operate in less competitive markets and non-heavily polluting industries, and after the implementation of the 2012 Green Credit Policy. These findings suggest that SMEs are more likely to adopt sustainable practices under heightened policy uncertainty, leveraging environmental initiatives as a strategic response to facilitate firm development and growth.

Keywords: Corporate environmental investment; Economic policy uncertainty; Clean energy; Small and medium-sized enterprises (SMEs) (search for similar items in EconPapers)
JEL-codes: D80 G18 G31 L11 Q56 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:148:y:2025:i:c:s0140988325005390

DOI: 10.1016/j.eneco.2025.108712

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