Energy policy and corporate financial performance: Evidence from China's 11th five-year plan

• Published in: Energy economics Vol. 93; p. 105030
• Main Authors: Liu, Cenjie, Fang, Jiayu, Xie, Rui
• Format: Journal Article
• Language: English
• Published: Kidlington Elsevier B.V 01.01.2021; Elsevier Science Ltd
• Subjects: 11th five-year plan; Binding energy-saving target; Corporate financial performance; Costs; Energy; Energy conservation; Energy economics; Energy policy; Financial performance; Financial ratios; Grasping; Inventory; Provinces; Public enterprise; Public finance; Turnover; Turnover rate; China; O13; Q54; 11th five-year plan; G30; Binding energy-saving target; Energy policy; Corporate financial performance
• ISSN: 0140-9883; 1873-6181
• DOI: 10.1016/j.eneco.2020.105030

The implementation of energy policies inevitably affects the micro-level behavior of enterprises, in turn affecting their financial performance. However, the relationship between China's energy policy and corporate financial performance remains to be verified. Combining of time, provincial difference in applying the binding energy-saving target in the 11th Five-Year Plan, and industry energy intensive variations, we employ a difference-in-difference-in-difference model to estimate the impact of energy policy on corporate financial performance. We find that in the high energy-intensive industries, stricter energy policy reduces corporate financial performance, as manifested by higher financial expense ratio, lower inventory turnover rate, and lower accounts receivables turnover ratio. In the eastern region, high energy-intensive enterprises within stricter energy policy provinces have higher financial expense ratio and lower inventory turnover ratio compared with similar enterprises in the central and western regions. Also, the energy policy has significant negative effect on the financial performance of large-scale enterprises and non-state-owned enterprises. Grasping this relationship is important for understanding the economic consequences of energy policy and helping the decisions-making of the Chinese government and regulated enterprises. •We employ a difference-in-difference-in-difference model to estimate the impact of energy policy on corporate financial performance.•In the more energy-intensive industries, stricter energy policy reduces corporate financial performance.•In the eastern region, high-energy enterprises within stricter energy policy have a higher financial expense ratio and lower inventory turnover ratio.•The energy policy has a significant negative effect on the financial performance of large-scale enterprises.•The energy policy has no significant impact on SOEs' financial performance, but a negative impact on the financial performance of non-SOEs.