The impact of economic policy uncertainty on a firm’s green behavior: Evidence from China

Abstract

By leveraging the availability of green activity indicators from Chinese firms, we examine the impact of economic policy uncertainty (EPU) on a firm’s green behavior. Our findings suggest that EPU adversely affects firm-level green attitudes. Additional analyses show that when the market lacks confidence, a firm has severe financial constraints, or a firm has no political connections, the adverse impact of EPU on green behavior is magnified. We also document that the effects of EPU on different green behaviors are heterogeneous. Overall, we find that in addition to asset prices and corporate financial practices, EPU impacts a firm’s green behavior. Policy implications are discussed.