An Analysis of the Effects of Trade Policy Uncertainty on Corporate Green Investment: The Viewpoints of Market Competition and Green Innovation

Abstract

Trade policy uncertainty is changing the logic of decision making of corporate operations in the context of the constant reconfiguration of the global trading system. In this paper, Chinese A-share listed companies over the period of 2017-2024 are chosen as the research sample to analyze the impact of trade policy uncertainty on corporations’ green investment and the transmission mechanisms behind it. The results show that trade policy uncertainty has a strong positive driving impact on corporate green investment, and the result is unchanged even after a sequence of robustness tests. The mechanism analysis shows that trade policy uncertainty can affect corporate green investment in two ways, which are based on the level of market competition and green innovation. The heterogeneity tests indicate that this effect is especially strong in the case of polluting companies, companies in the east, and companies in high-tech sectors. The current study will add a new twist to the study of corporate sustainable development, considering the macro-policy-making environment and offer recommendations to the companies to develop green transformation strategies in the face of uncertainty.