Towards Affordable Financing: The Role of Local Government Attention in Reducing Cost of Equity Capital for Renewable Energy Firms

Towards Affordable Financing: The Role of Local Government Attention in Reducing Cost of Equity Capital for Renewable Energy Firms | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Article Towards Affordable Financing: The Role of Local Government Attention in Reducing Cost of Equity Capital for Renewable Energy Firms Lige Bai, Langjie Liu, Fangfei Jiang This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-8522490/v1 This work is licensed under a CC BY 4.0 License Status: Under Revision Version 1 posted 10 You are reading this latest preprint version Abstract High financing costs remain a major obstacle to the development of renewable energy, particularly in emerging economies. Since the high cost of capital is largely attributed to investors’ apprehensions regarding the policy uncertainty and local conflicts, high attention from the local government on the advancement of renewable energy industry may alleviate potential risks and improve financing conditions. This research aims to examine the extent to which local government attention contributes to a reduction in the local firm’s financing costs. Applying natural language processing to annual government work reports from 293 Chinese prefecture-level cities between 2012 and 2023, the study develops a local government attention indicator and identify the causal effect of such attention on corporate capital costs through double machine learning. The results reveal that local government attention significantly lowers the cost of equity for local renewable energy firms by optimizing governmental resource allocation and promoting information disclosure. Furthermore, this effect demonstrates heterogeneity at two levels. At the regional level, the impact is more pronounced in cities characterized by better grid integration, lower competitive pressure, non-resource dependency, and stronger innovation environments; at the firm level, it is more salient among enterprises characterized by state-owned, utility companies, and engaged in non-hydropower renewable energy sectors. In conclusion, local government attention is essential for reducing ICOC and improving financial accessibility in developing economies. Nevertheless, local government should also exercise caution to ensure the intensity of attention is aligned with the specific conditions for renewable energy development in their respective regions and firms. Business and commerce/Economics Social science/Economics Earth and environmental sciences/Environmental social sciences Local government attention Energy governance Cost of capital Renewable energy investment Full Text Additional Declarations No competing interests reported. Declaration of Interest Statement All authors have no conflicts of interest to disclose. Declaration of Ai-generate content None of the authors have employed any form of artificial intelligence in any way in the conduct of the research or the preparation of the manuscript. Tables are available in the Supplementary Files section. Supplementary Files Tables.docx Appendix.docx Highlight.docx Cite Share Download PDF Status: Under Revision Version 1 posted Editorial decision: Revision requested 15 May, 2026 Reviews received at journal 18 Apr, 2026 Reviewers agreed at journal 26 Mar, 2026 Reviews received at journal 13 Mar, 2026 Reviewers agreed at journal 04 Mar, 2026 Reviewers invited by journal 05 Feb, 2026 Editor assigned by journal 05 Feb, 2026 Editor invited by journal 20 Jan, 2026 Submission checks completed at journal 16 Jan, 2026 First submitted to journal 16 Jan, 2026 You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. As a division of Research Square Company, we’re committed to making research communication faster, fairer, and more useful. We do this by developing innovative software and high quality services for the global research community. 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Also discoverable on Platform About Our Team In Review Editorial Policies Advisory Board Help Center Resources Author Services Accessibility API Access RSS feed Manage Cookie Preferences © Research Square 2026 | ISSN 2693-5015 (online) Privacy Policy Terms of Service Do Not Sell My Personal Information {"props":{"pageProps":{"initialData":{"identity":"rs-8522490","acceptedTermsAndConditions":true,"allowDirectSubmit":false,"archivedVersions":[],"articleType":"Article","associatedPublications":[],"authors":[{"id":586325990,"identity":"eb42778e-b0de-4383-84b7-eb7a6f430da0","order_by":0,"name":"Lige Bai","email":"","orcid":"","institution":"Beijing Institute of Technology","correspondingAuthor":false,"prefix":"","firstName":"Lige","middleName":"","lastName":"Bai","suffix":""},{"id":586325991,"identity":"3e1f494b-3e4b-42da-b99c-fa479cc53363","order_by":1,"name":"Langjie 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