Impact of Green Fiscal Policy on the Investment Efficiency of Renewable Energy Enterprises in China

Abstract This study focuses on the investment efficiency of renewable energy enterprises and how they respond to government green fiscal policies. It complements previous research that only examines corporate investment efficiency from government subsidies or tax incentives. Moreover, we extend the impact of green fiscal policies on the investment inefficiency of renewable energy enterprises from the perspective of property heterogeneity. We choose financial data of 158 renewable energy enterprises for both state-owned (SOEs) and private (Non-SOEs) listed on the Shanghai and Shenzhen Stock Exchange from 2010-2018 and use the Richardson model to measure the investment efficiency. The fixed-effect panel model is applied to explore the impact of green fiscal policies on the investment efficiency of renewable energy enterprises. The results show that, in general, green financial subsidies aggravate over-investment, especially for SOEs, while green tax incentives alleviate under-investment considerably, especially for Non-SOEs. We also find inefficient investment pervasive in China, among which the over-investment problem more serious than under-investment. But for the Non-SOEs, under-investment is more predominant. Finally, we propose that government subsidies for SOEs should be constrained and supervised, while more flexible tax incentives for Non-SOEs should be advocated.