Does air quality affect firms’ investment efficiency? Evidence from China

Jiang, Dequan; Li, Weiping; Shen, Yang; Zhang, Ying

doi:10.1016/j.iref.2022.01.001

Cited by 19 publications

(8 citation statements)

References 62 publications

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“…Moreover, it has an irreversible impact on the inflow of regional labor and triggers the phenomenon of escaping from "Beijing, Shanghai, and Guangzhou," which affects the urbanization process (Hanlon, 2016). Additionally, air pollution seriously impacts the stock prices and financial decisions of microenterprises (Lepori 2016), the cost of debt financing (Tan et al, 2022), the accrual earnings management (Jiang et al, 2022a;Jiang et al, 2022b), and investment efficiency (He and Lin 2022). Thus, air pollution with PM2.5 as the primary pollutant not only seriously affects regular life but also has a huge negative impact on microeconomic agents in China.…”

Section: Introductionmentioning

confidence: 99%

Impact of air quality on enterprise productivity: Evidence from Chinese listed companies

Liu

Yang

Cai

2023

Front. Environ. Sci.

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We provide insights and innovative ideas for China to achieve green development and promote high-quality economic development by studying the impact of air quality on enterprise productivity. This paper uses data from 2008 to 2016 for A-share companies listed on the Shanghai and Shenzhen stock markets, as well as the levels of particulate matter under 2.5 μm in diameter for 214 major Chinese cities. At the same time, this paper innovatively applies regression discontinuity and the Spatial Durbin Model for empirical testing. Considering the endogeneity, we choose the air flow index as an instrumental variable and the generalized space two-stage least squares method for the endogenous test. Additionally, we use dynamic regression and different spatial weight matrix to conduct robustness tests and reselect data from 2008 to 2012 and 2013 to 2016 as samples. Moreover, we test corporate heterogeneity from three perspectives: pollutant type, firm equity, and an industry’s technological level. The results show that the deterioration of local air quality significantly inhibits firm productivity, while the spatial spillover effects of pollution from surrounding cities also have a significant dampening effect on firm productivity. This negative effect is transmitted through research and development innovation capacity, human capital, and government subsidies. This empirical evidence from listed companies can be used for evaluating air quality management to enhance enterprise productivity, as well as to provide policy recommendations for boosting firm productivity through improved air quality.

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Section: Introductionmentioning

confidence: 99%

Impact of air quality on enterprise productivity: Evidence from Chinese listed companies

Liu

Yang

Cai

2023

Front. Environ. Sci.

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“…This positive effect is more pronounced in highly competitive industries. Tinaikar and Xu (2023) further provide evidence that competition in the product market leads to overinvestment.…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 81%

Economic policy uncertainty and SMEs’ investment efficiency in France: does competitive pressure matter?

Hamza,

Barka,

Verdie

et al. 2023

EBR

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Purpose This paper aims to investigate empirically the impact of economic policy uncertainty (EPU) on small-to-medium enterprises’ (SMEs) investment efficiency and whether product market competition influences this association. Design/methodology/approach The study was conducted on French SMEs listed on the “CAC Mid & Small” Index over 2008–2021. This paper proposes a quantitative approach to test the relationship between the EPU and SME investment efficiency. Findings These findings show that EPU significantly alleviates SMEs’ investment inefficiency, reflected in the reduction of overinvestment and underinvestment. As EPU increases, firms with more exposure to such uncertainty invest more efficiently, and their overinvestment tendency becomes lower, while reducing the risk of underinvestment. These results are still significant after a series of robustness checks. Further analysis shows that EPU mitigates investment inefficiency to a greater extent for firms operating in highly competitive industries, and better information environments. Research limitations/implications This study was limited to the French EPU index and could be extended to a European or even international scale. Moreover, using alternative uncertainty indexes across various European countries can be more advantageous in further studies. Although results suggest that EPU affects investment efficiency, future studies could further explore the mechanisms through which EPU affects SMEs’ investment efficiency and, in particular, across different industries. Understanding these variations due to the specific industry-EPU sensitivity can provide valuable insights. Finally, it would be interesting to examine the risk management strategies adopted by SMEs in the face of EPU, combined with other growing risks, such as climate risk. Practical implications In the face of high EPU, SME managers must improve risk management, adopt appropriate investment strategies, consider using predictive analytics or economic forecasting tools and embrace technology and innovation that enhance agility and responsiveness to policy uncertainty. Besides, political decision-makers should adapt their regulatory policies (tax, labor, housing, etc.) to preserve the efficiency of SME investment. Originality/value Although the debates on how policy uncertainty affects the investment and financing of large businesses have received a great concern of academia, to the best of the authors’ knowledge, this is the first study that focuses on the effect of EPU on investment distortions for SMEs.

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“…A larger Pollution represents heavier air pollution. Besides, we also employ the natural logarithm of the annual median AQI ( Pollution2 ), the PM2.5 density ( PM2.5 ), and PM10 density ( PM10 ) to measure air pollution (Jiang et al, 2022b).…”

Section: Sample and Methodologymentioning

confidence: 99%

“…We alternatively proxy for air pollution using Pollution2, which is the natural logarithm of the median AQI index in a city. PM 2.5 is a crucial air pollutant and is adopted as the proxy for air pollution in many studies (Jiang et al, 2022b;Liu et al, 2021). Thus, we harness the natural logarithm of PM 2.5 density (PM2.5) to proxy air pollution.…”

Section: App E Ndix B : Robustness Tests B1 | Alternative Proxies For...mentioning

confidence: 99%

“…The detrimental impact of air pollutants on human beings has been widely acknowledged over time. Recent studies have extended the research to how poor air quality impacts firms (Dong et al, 2021; Jiang et al, 2022b; Li et al, 2021; Tan et al, 2021; Wang et al, 2021b). While existing literature has documented the adverse influence of air pollution on firm performance and investors' trading behavior, there has yet to be an explicit examination of firms' reaction to air pollution.…”

Section: Introductionmentioning

confidence: 99%

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Clear the air via dividends: Corporates' response to air pollution

Li,

Zhang,

Cheng

et al. 2023

Bus Strat Env

Self Cite

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Based on China A‐share listed firms, we investigate how firms respond to air pollution using the dividend payout policy. We highlight the signaling role of dividends, documenting that firms pay higher dividends to appease and attract investors when facing more severe pollution. This effect is more pronounced when investor attention is high and less salient if shareholder governance is strong, reinforcing the signaling hypothesis and substitute model of dividend theory. Our results reject the hypothesis that air pollution decreases dividend payouts by enlarging a firm's financial constraints and cash flow uncertainty.

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Does air quality affect firms’ investment efficiency? Evidence from China

Cited by 19 publications

References 62 publications

Impact of air quality on enterprise productivity: Evidence from Chinese listed companies

Impact of air quality on enterprise productivity: Evidence from Chinese listed companies

Economic policy uncertainty and SMEs’ investment efficiency in France: does competitive pressure matter?

Clear the air via dividends: Corporates' response to air pollution

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