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Government green environmental concerns and corporate real investment decisions: Does financial sector development matter?

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  • Wen, Jun
  • Farooq, Umar
  • Tabash, Mosab I.
  • El Refae, Ghaleb A.
  • Ahmed, Jaleel
  • Subhani, Bilal Haider

Abstract

The government intervention directly achieves the strategic variation of industrial sector. Following this, the current study analyzes the impact of government concerns for green environment on investment decisions of industrial sector and how this effect changes across the countries that have developed financial sector. The sample size consists of financial statistics for the year 2007–2016 of non-financial sector firms from 11 selected economies of Asia. We employ panel EGLS (estimated generalized least square) and two-step system GMM (generalized method of moments) model due to problem of heteroskedasticity and endogeneity relatively. The statistical outputs of both models imply that carbon taxation has a negative impact while other green environmental strategies i.e., renewable energy utilization, production of electricity from renewable energy sources, and green growth productivity positively and significantly influence real investment decisions. Additionally, the statistical analysis illustrates the moderating impact of financial sector development on aforementioned relationship. The current analysis corroborates the thoughts of Porter's hypothesis and direct the important policy recommendations regarding environmental policies and their dynamical role in industrial sector investment decisions. Industrial sector should transform its energy needs from conventional energy production sources to renewable energy production due to positive impacts of renewable sources on investment.

Suggested Citation

  • Wen, Jun & Farooq, Umar & Tabash, Mosab I. & El Refae, Ghaleb A. & Ahmed, Jaleel & Subhani, Bilal Haider, 2021. "Government green environmental concerns and corporate real investment decisions: Does financial sector development matter?," Energy Policy, Elsevier, vol. 158(C).
    • Handle: RePEc:eee:enepol:v:158:y:2021:i:c:s0301421521004559
    DOI: 10.1016/j.enpol.2021.112585
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    2. Jaroslava Kádárová & Laura Lachvajderová & Dominika Sukopová, 2023. "Impact of Digitalization on SME Performance of the EU27: Panel Data Analysis," Sustainability, MDPI, vol. 15(13), pages 1-19, June.
    3. Ajay Kumar & Jyotirani Gupta & Niladri Das, 2022. "Revisiting the influence of corporate sustainability practices on corporate financial performance: An evidence from the global energy sector," Business Strategy and the Environment, Wiley Blackwell, vol. 31(7), pages 3231-3253, November.
    4. Farooq, Umar & Wen, Jun & Tabash, Mosab I. & Fadoul, Modawi, 2024. "Environmental regulations and capital investment: Does green innovation allow to grow?," International Review of Economics & Finance, Elsevier, vol. 89(PA), pages 878-893.
    5. Chen, Han & Deng, Jianping & Lu, Meiting & Zhang, Pengdong & Zhang, Qihao, 2024. "Government environmental attention, credit supply and firms' green investment," Energy Economics, Elsevier, vol. 134(C).
    6. Sandra Chukwudumebi Obiora & Muhammad Abid & Olusola Bamisile & Juliana Hj Zaini, 2023. "Is Carbon Neutrality Attainable with Financial Sector Expansion in Various Economies? An Intrinsic Analysis of Economic Activity on CO 2 Emissions," Sustainability, MDPI, vol. 15(9), pages 1-27, April.

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    More about this item

    Keywords

    Asian economies; Corporate real investment; Financial sector development; Government green environment concerns;
    All these keywords.

    JEL classification:

    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General

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