Financial leasing and China’s renewable energy firms' investment behavior: In the context of government subsidy reduction

Renewable energy projects are characterized by substantial investment costs and significant capital requirements. In the context of reduced government subsidies, financial leasing has emerged as a crucial funding source for Chinese renewable energy projects. However, whether financial leasing can become an effective strategic choice to promote renewable energy investment in China remains to be empirically tested. Utilizing microdata from 114 Chinese renewable energy companies from 2011 to 2022, we have derived the following research conclusions: (1) Financial leasing significantly facilitates renewable energy investment. Bootstrap testing indicates that financial leasing can indirectly enhance renewable energy investment by alleviating financing constraints. (2) Financial mismatches undermine the positive impact of financial leasing on renewable energy investment. (3) Financial leasing significantly affects the investments of small and medium-sized renewable energy enterprises receiving lower government subsidies. However, no statistically significant evidence suggests a similar effect for large firms with substantial government subsidies. (4) There is a substitution effect between financial leasing and government subsidies. As government subsidies decline, the role of financial leasing in promoting renewable energy investment becomes increasingly significant. Based on these findings, we proposed targeted policy recommendations.