Is there any difference in the impact of economic policy uncertainty on the investment of traditional and renewable energy enterprises? – A comparative study based on regulatory effects

Abstract

Using the data of 52 traditional energy enterprises and 116 renewable energy enterprises of China from 2007Q1 to 2017Q4, this paper investigates the differential impact of economic policy uncertainty on different types of energy enterprises’ investment using a panel regression model. The paper further analyzes the regulatory effect of enterprises’ characteristics, such as growth opportunities, financing constraints, external demand, and ownership concentration, on the relationship between economic policy uncertainty and investment. It concludes that first, economic policy uncertainty significantly inhibits traditional energy enterprises’ investment, with a coefficient of 0.0042, whereas the effect is not significant for renewable energy enterprises. Second, economic policy uncertainty inhibits the investment of coal and petroleum enterprises, with coefficients of 0.0046 and 0.0054 respectively. Whereas it significantly promotes the investment of solar energy, geothermal energy and other renewable energy enterprises, with effect degree of 0.0032, 0.0033 and 0.0031, respectively. Third, growth opportunities can offset the inhibitory effect of economic policy uncertainty on investment. Besides, with the strengthening of financing constraints, economic policy uncertainty increases traditional energy enterprises’ investment, though the effect is not significant for renewable energy enterprises. Moreover, the regulatory effect of external demand is not significant for both traditional and renewable energy enterprises. Further, the ownership concentration can strengthen the inhibitory effect of economic policy uncertainty on renewable energy enterprises’ investment, but it is not significant for the traditional energy enterprises. Fourth, the regulatory effect of enterprise type is significantly different for coal and petroleum enterprises.