Not All Costs are Created Equal: How Climate Policy Uncertainty Deepens Expense stickiness

This study uses the climate policy uncertainty index—a text-based measure from mainstream media climate policy news—as a proxy for climate policy uncertainty. Using China’s A-share data (2010–2022), this study finds that climate policy uncertainty increases firm-level expense stickiness via adjustment costs, agency costs, and expense-adjustment capacity. This negative effect is present only for non-executive compensation (not executive compensation). We examine cross-sectional heterogeneity through three channels—macro-level geographic ecology and factor constraints, meso-level market structure and industry attributes, and micro-level firm characteristics and driving systems—assessing key moderating factors to evaluate their role in shaping the effects.