Will carbon emission trading scheme affect industrial investment? Evidence from China’s listed companies

Using data from A-share listed companies in China spanning the years 2008 to 2020, this study constructs a Staggered Difference-in-Differences (DID) model to estimate the influence of the Carbon Emission Trading Scheme (ETS) on industrial investment, based on signalling theory, financing constraint theory and capital structure theory. The main findings are summarized as follows: Firstly, the implementation of ETS is observed to enhance industrial investment levels within listed companies located in pilot areas. This finding is confirmed through a series of robustness tests that further validate its credibility. Secondly, the analysis of mechanisms reveals that the positive effect of ETS on industrial investment is due to its ability to improve the environmental performance and market value of listed companies. These findings provide empirical evidence and valuable insights for assessing the efficacy of environmental regulation policies and refining the ETS framework.