Inhibiting or Promoting: The Impact of Low-Carbon Policy Intensity and Corporate Financialisation

This study examines the effect of low-carbon policy intensity on corporate financialisation using a panel of Chinese A-share-listed firms from 2012 to 2022. We find that low-carbon policy intensity increases corporate financialisation. The mechanism analysis indicates that this relationship is primarily driven by the short-term speculative motive rather than the “reservoir” motive. Greater stringency of low-carbon policies crowds out real investment and increases firms’ propensity to allocate idle funds to financial assets. Heterogeneity analysis further indicates that command-and-control policy instruments exert a significantly stronger positive effect on corporate financialisation than other policy components. We find that the positive association between low-carbon policies and corporate financialisation is more pronounced among firms in non-polluting industries, non-state-owned enterprises, and firms with higher financing constraints, compared with firms in polluting industries, state-owned enterprises, and firms with lower financing constraints. The effect is also stronger in regions with higher levels of financial development and a larger share of the secondary sector in GDP than in other regions. The findings are of significance in understanding the relationship between low-carbon policy intensity and corporate financialisation, providing inspiration for policy-makers to guide the capital back to the real economy.