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The impact of government green subsidies on stock price crash risk

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  • Sun, Guanglin
  • Wang, Jiawei
  • Ai, Yongfang

Abstract

Examining panel data encompassing Chinese A-share listed firms spanning 2010 to 2022, this investigation empirically dissects the repercussions and mechanisms of government green subsidies on stock price crash risk. The study unveils a noteworthy inverse correlation between government green subsidies and the risk of stock price crashes. A negative relationship emerges, demonstrating that heightened acquisition of government green subsidies corresponds to diminished levels of stock price crash risk. The abatement of financing constraints and the improvement of investor sentiment emerge as consequential pathways through which government green subsidies attenuate the risk of stock price crashes. Furthermore, the influence of government green subsidies on stock price crash risk is subject to the divergent internal and external characteristics of companies. These findings further confirm the efficacy of government green subsidies from the perspectives of investors and the capital market. This paper introducing a novel angle for policymakers to gauge the effectiveness of green subsidies, advocating for continued enhancement and promotion of soft environmental regulation typified by government green subsidies.

Suggested Citation

  • Sun, Guanglin & Wang, Jiawei & Ai, Yongfang, 2024. "The impact of government green subsidies on stock price crash risk," Energy Economics, Elsevier, vol. 134(C).
    • Handle: RePEc:eee:eneeco:v:134:y:2024:i:c:s0140988324002810
    DOI: 10.1016/j.eneco.2024.107573
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