Abstract
This paper uses the carbon emission trading policy as a quasi-natural experiment to comprehensively investigate its impact on the financial and market performance of firms. The study uses data from A-share listed companies for the period from 2009 to 2022 and adopts the difference-in-differences model for a rigorous analysis. The mediating effect of financing constraints and the moderating role of managerial capabilities are examined with respect to the influencing mechanisms; heterogeneity was also analyzed in terms of carbon allowance allocation methods, carbon prices, environmental enforcement efforts, and type of industry. The results of the study show that the carbon trading policy has a significant effect on improving the financial performance of firms, while also inhibiting their market performance. The feasibility of the findings was further validated after conducting robustness tests such as propensity score matching and placebo tests. The mechanism analysis finds that financing constraints play a masking effect on the impact of carbon trading policies on firms’ financial performance; managerial competence can positively moderate firms’ market performance. Heterogeneity analysis shows that the inhibitory effect of emissions trading policies on market performance is more significant for firms in regions with a smaller share of free allowances. For companies in high carbon price regions, carbon trading policies have a more significant impact on financial performance. For companies located in regions with higher levels of environmental enforcement, the positive effect of carbon trading policies on financial performance is unchanged, but the dampening effect on market performance is more significant. Carbon trading policies have a stronger positive effect on the financial performance of high-polluting firms, but a more significant dampening effect on the market performance of low-polluting firms. The findings of this study enhance China’s research framework on the economic impacts of carbon trading policies on micro-enterprises, promoting sustainable business development and serving as a useful reference for policy sustainability.
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