Nexus between government green environmental concerns and corporate real investment: Empirical evidence from selected Asian economies

Abstract

Industrial sector is a key stakeholder of energy consumption and therefore considered major icon for environmental deterioration. However, government intervention through some policy instruments can mitigate negative externality of this sector. In this regard, this study aims to explore the possible impacts of government green environment concerns on corporate real investment decisions. For this purpose, 10 years of panel data (2007–2016) from non-financial sector enterprises (6647 enterprises) of 11 Asian economies were collected and system GMM model applied to estimates the regression. The statistical outputs of this model first suggest the negative influence of carbon tax rate on corporate investment decisions because it creates an extra-cost of taxation. However, other environmental policies including electricity production from renewable energy sources, consumption of renewable energy, and green growth productivity positively impact the corporate investment. These environmental strategies not only ensure green environment but also offer cheap fuel for industrial operations which encourages them to enhance its investment volume. The findings of study support the notions of Porter's hypothesis. This study develops a new theoretical and empirical framework for how government green environment policies impact real sector investment. As for policy concerns, corporate managers should prioritize renewable energy sources for fuel needs because such resources positively adhere to corporate investment. Additionally, government policy officials should not develop such environmental regulations i.e., carbon tax rate at the cost of industrial degradation because it can create other economic complexities including unemployment, and shortage of industrial goods. The policy officials should urge the industrial sector on green production by offering subsidies. It can create a win-win situation i.e., green environment and positive industrial investment.