Climate policy uncertainty and corporate investment: evidence from the Chinese energy industry

Abstract

In recent years, with the increasing attention paid to climate risks, the changes in climate policies are also more full of uncertainties, which have brought tremendous impact to economic entities, including companies. Using the dynamic threshold model, this study investigates the nonlinear and the asymmetric effect of climate policy uncertainty on Chinese firm investment decisions with panel data of 128 Chinese energy-related companies from 2007 to 2019. The empirical findings indicate that the influence of climate policy uncertainty on firm investment is significantly nonlinear. Overall, climate policy uncertainty is not apparently related to corporate investments in the high-level range, while it negatively affects the investments in the low-level range. In addition, to be more specific, the negative impact of climate policy uncertainty on the mining industry is tremendous, while the influence on the production and supply of electricity, heat, gas, and water sector is remarkably positive. The results of this study could help the company managers and policymakers to arrange appropriate related strategies under different climate policy conditions.