Abstract
Emissions trading schemes (ETSs) are effective measures that facilitate economic growth and carbon mitigation, especially for developing countries such as China. These schemes can further affect the cash flow, production, and investment decisions of regulated companies. However, few empirical studies have explored how ETSs promote companies’ market value. We systematically evaluate the influence of the carbon emission trading (CET) policy on companies’ market value and explore the influential mechanism. We use the data of listed companies from the Chinese stock “A” markets and employ the difference-in-difference method to account for the unobserved cause of the CET policy regarding companies’ market value. Robust benchmark regression results reveal that the CET policy promotes companies’ market value significantly. The mechanism analysis reveals that the CET policy can improve the market value of listed companies by influencing the carbon price, innovative activities, and carbon disclosure. The results of the heterogeneity analysis show that the CET policy’s impact on companies’ market value is heterogeneous in terms of marketization degree, industry, firm ownership, and different regions. We suggest that the carbon pricing mechanism, degree of market perfection, carbon disclosure policy, and carbon finance should be optimized to improve the efficiency of ETSs.
Highlights
As a market‐oriented environmental regulation policy, the carbon emission trading (CET) policy internalizes the cost of carbon emission reduction of enterprises, which will be transmitted to the securities market and may affect the market value of enterprises
The results indicate no significant difference between the treatment and control groups before the policy is implemented, while it implies a significant increase in companies’ market value after implementing the pilot CET policy
The regression results in columns (1) and (2) of Table 6 indicate that the carbon price has a negative mediation effect in the CET policy process, affecting the market value of listed companies
Summary
As a market‐oriented environmental regulation policy, the carbon emission trading (CET) policy internalizes the cost of carbon emission reduction of enterprises, which will be transmitted to the securities market and may affect the market value of enterprises. Implementing a CET policy increases the production and operation costs of enterprises, which would crowd out their investment expenditure This cost information is exposed to the capital market via corporate financial reports. There is a strong link between the stock market and the carbon emission trading market [11] Based on this price signal and its productivity, a company will decide whether to purchase carbon emission rights to meet the government’s emission reduction requirements or reduce emissions per unit of output through innovation. Companies with higher productivity can carry out innovative activities that meet the government’s emission reduction requirements, and enhance product competitiveness and profits, thereby increasing the company’s market value [12,13]. Tives offer an excellent opportunity for policy evaluation to investigate the impact of ETS on companies’ market value
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