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Corporate sustainability policies and corporate investment efficiency: Evidence from the quasi-natural experiment in China

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  • Ho, Kung-Cheng
  • Yan, Cheng
  • Mao, Zhicheng
  • An, Jiafu

Abstract

This paper studies the impact of green disclosure on firm investment efficiency, leveraging a policy experiment in China. Since 2012, the Chinese government has begun to implement the Ambient Air Quality Standards (AQS), which have strengthened the requirements for green disclosure throughout the country. We exploit the rollout of the AQS and find that tightening the green disclosure requirements significantly increases corporate investment efficiency. This increase is primarily driven by a reduction in underinvestment among non-state-owned firms and firms with low institutional ownership. Further analysis suggests that the alleviation of agency problems and the reduction of financial constraints are the two main mechanisms through which green disclosure influences firm investment efficiency. Our findings provide valuable policy implications, indicating that strengthening green disclosure standards can have a substantial positive impact on firm investment outcomes.

Suggested Citation

  • Ho, Kung-Cheng & Yan, Cheng & Mao, Zhicheng & An, Jiafu, 2023. "Corporate sustainability policies and corporate investment efficiency: Evidence from the quasi-natural experiment in China," Energy Economics, Elsevier, vol. 127(PB).
    • Handle: RePEc:eee:eneeco:v:127:y:2023:i:pb:s0140988323005480
    DOI: 10.1016/j.eneco.2023.107050
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    More about this item

    Keywords

    Corporate sustainability policy; Green disclosure; Investment efficiency; Agency problems; Financial constraints;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • N7 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services

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