The 21st century has already witnessed phenomenal worldwide growth in renewable energy investments. China has been especially remarkable, surpassing both the US and the EU in 2013. Some recent facts, however, have raised the question of whether China's exuberant investment in renewable energy sector is rational. This study aims to contribute to the literature and to the debate in two ways. First, it tests the over-investment hypothesis based on the mainstream finance methodology (the Q model); second, it analyses the role of capital structure in the performance of China's renewable energy firms. Empirical results could then provide recommendations for policymakers on how to prompt sustainable growth in the renewable energy sector. Although based on China, this study's main findings could also contribute to policy design for emerging economies.

PurposeThis paper investigates the impact of credit risk shocks on the evolution of banking efficiency in China.Design/methodology/approachThis paper introduces credit risk as a bad output into a bootstrap data envelopment analysis (bootstrap-DEA) model.FindingsDuring a credit risk shock, the efficiency levels of both state-owned commercial banks and joint-stock commercial banks are significantly higher than those of urban/rural commercial banks, and the efficiency differences between these banks further increase during a period of economic slowdown. This paper also finds that the efficiencies of joint-stock commercial banks are the most sensitive to credit risk shocks; these banks are the first to be affected and the first to completely adjust. However, urban/rural commercial banks adjust very slowly.Originality/valueMost scholars still use the traditional DEA method to estimate China's banking efficiency. The bootstrap-DEA method is clearly able to obtain a more exact estimated efficiency score. In fact, in comparison with the bootstrap-DEA model, we found that the traditional DEA method overestimates China's banking efficiency, and this is an especially serious problem for those banks that have a high efficiency score.