Date: 19 Jan 2023 (Thu)
Capital Market Development: China and Asia
- Leveling Up Your Green Mojo: The Benefits of Beneficent Investment
19 Jan 2023, Thursday
10:00 am – 11:10 am, Thursday (Hong Kong Time, UTC+8)
[ Leveling Up Your Green Mojo: The Benefits of Beneficent Investment ]
Using a manually collected project-level dataset and exploiting the staggered designation of the major cities for environmental protection (MCEP) scheme in China, the authors show that firms increase their environmental investments after their city experiences heightened pollution prevention and control by the government. The effect is mostly driven by “beneficent investments” – environmental projects that not only benefit the firm but also directly spill over to society at large. Following the establishment of the MCEP, media coverage on environmental issues in local cities increases. City officials are more likely to be promoted if they meet pre-set environmental targets or reduce pollution. Firms spending more on green investments pay less in taxes, garner more subsidies, and secure more bank loans. MCEP cities with larger corporate environmental spending reduce pollution and improve local employment to a greater extent. They also attract more high-quality new firms. Heavily polluting firms contribute less to the city’s tax revenue and speed up their expansion to non-polluting industries. Firms investing more on environmental projects – especially the beneficent ones – have larger value gains, produce more green patents, and experience greater labor productivity than other firms in the same MCEP city. The authors' findings highlight the role of regulatory mechanisms in enabling E&G investment to be both value- and welfare-enhancing.
Xiaoyun YU, Professor of Finance, Shanghai Advanced Institute of Finance, Shanghai Jiao Tong University
Xiting WU, Assistant Professor of Finance, Shandong University
Jiaxing YOU, Professor of Finance at the School of Management, Xiamen University
Clara ZHOU, Associate Professor, Department of Applied Finance, Macquarie University
Laura STARKS, George Kozmetsky Distinguished University Chair and Professor of Finance, McCombs School of Business, University of Texas at Austin
About the Webinar
Financial market development goes hand-in-hand with economic growth. The development of China's capital markets in terms of size, regulations, capability, and efficiency has been impressive. China may now even lead globally in some dimensions, notably e-payments systems. Yet, China's capital markets are still a work-in-progress facing both generic and unique challenges. Other Asian capital markets have even greater uneven development. Some in advanced Asian economies have acquired globally acclaimed reputation and capabilities while various regulatory and structural weaknesses dwarf others. Corporations and investors have been inclined to arbitrage cross-border regulatory and developmental gaps; so the very uneven status of capital markets across Asia is a policy issue for the governments in the entire region and perhaps globally. Analysing the positive and negative lessons in the functioning of Asia's capital markets, and identifying reforms and applications of technology that could further improve Asian capital markets' allocation efficiency, financial inclusion, and forewarning against reforms that might cause problems can benefit practitioners, policymakers and researchers, and can contribute significantly to overall prosperity.
The ABFER and the University of Chicago's Becker Friedman Institute China (BFI-China), in collaboration with National University of Singapore (NUS) Business School, Shanghai Advanced Institute of Finance (SAIF), The Chinese University of Hong Kong (CUHK) Department of Economics, CUHK-Shenzhen and Tsinghua University PBC School of Finance (Tsinghua PBCSF), hope to provide a virtual network to benefit researchers, policymakers, and practitioners from Asia and beyond.