IDEAS home Printed from https://ideas.repec.org/p/ecl/ohidic/2024-25.html
   My bibliography  Save this paper

Do Production Frictions Affect the Impact of Sustainable Investing?

Author

Listed:
  • Yin, Cynthia

    (Ohio State U)

Abstract

Prior studies focus on how investors' sustainability preferences incentivize firms to reallocate resources from dirty to clean physical capital. However, the impact of investors' preferences on capital allocation depends critically on whether clean capital and dirty capital are substitutable. I develop a novel empirical strategy showing that dirty capital and clean capital are highly complementary. Theoretically, I explore firms' investment decisions, assuming that investors dislike carbon emissions through both risk and nonpecuniary utility channels. Given the current level of complementarity, investors' preferences have a limited impact on investment decisions, underscoring the need for technological innovation to address this production friction.

Suggested Citation

  • Yin, Cynthia, 2024. "Do Production Frictions Affect the Impact of Sustainable Investing?," Working Paper Series 2024-25, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
    • Handle: RePEc:ecl:ohidic:2024-25
    as

    Download full text from publisher

    File URL: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5019815
    Download Restriction: no
    ---><---

    More about this item

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • 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
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ecl:ohidic:2024-25. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/cdohsus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.