Carbon Emissions Trading System and Investment Efficiency

The lists of companies involved in ETSs are taken from the official website of China’s Ministry of Ecology and Environment. The financial data are obtained from the China Stock Market and Accounting Research database. China has launched ETSs in nine pilot provinces/cities since 2013: Beijing, Tianjin, Shanghai, Chongqing, Hubei, Guangdong, Shenzhen, Sichuan, and Fujian. This study selects non-financial A-share-listed companies in the Shanghai and Shenzhen stock exchange markets from 2008 to 2020. The data are then screened to avoid the impact of special treatment companies and the financial industry, and samples with missing control variables are deleted. To eliminate the influence of outliers, the continuous variables in the model are tailed at the 1% and 99% levels.

This study further uses propensity score matching (PSM) to screen the samples to solve any endogeneity problems. Following existing research (Dehejia and Wahba, 2002; Shipman et al., 2017; Chen et al., 2018), this study uses pilot companies as the treatment group (Treat) and non-pilot companies as the control group. Meanwhile, this study uses the following variables to match the sample: firm size (LNASSET), fixed asset density (PPE), institutional investors’ shareholding ratio (Lnshold), board size (Board), leverage (Lev), net operating cash flow (CFA), return on total asset (ROA), and cash flow (Cash). The industry and year fixed effects are concurrently controlled.