Carbon emission trading policy and green technological innovation in Chinese listed companies: A corporate reputation perspective

Abstract

The carbon emission trading policy (CET) makes enterprises' pollution information transparent and is an important environmental regulation tool for China to achieve the goal of "carbon peak" and "carbon neutrality." Taking A-share listed companies in China's Shanghai and Shenzhen stock exchange from 2008 to 2021 as a research sample, this paper chooses the implementation of China's carbon emission trading policy in seven pilot regions as a quasi-natural experimental scenario and takes 2014 as the inception time of the policy to construct the difference-in-difference model with the fixed effect. The research then employs a multiple regression model and other statistical methods, such as an event study and placebo test, to examine the impact and mechanism of carbon emission trading policies on companies' green technological innovation. The study reveals that CET significantly improves enterprises' green technological innovation, attributed to weighing benefits against costs and preserving corporate reputation. Compared to purchasing carbon quotas for a long time, green technological innovation is a sustainable development strategy for enterprises, saving pollution costs and enhancing corporate reputation. The effect of CET on green technological innovation is more pronounced in larger enterprises, polluting industries, and regions where policy implementation is more rigorous. Enterprises that carry out green technological innovation to comply with CET can enjoy better reputations and lower financial costs. This study enriches and expands the research horizon of the impact of carbon trading policy on enterprises' green technological innovation, examining it from both theoretical and empirical perspectives. It demonstrates that green technological innovation is a long-term strategic choice for enterprises, providing implications for achieving superior policy advantages. In addition, the research shows that CET alleviates information asymmetry and facilitates the disclosure of carbon information, offering an opportunity for external stakeholders to better oversee their corporations.