Carbon emission trading scheme and green investor entry: Evidence from China

Abstract

The carbon emission trading scheme (ETS) is one of the most important market-incentive green finance policies aimed at mitigating carbon emissions. Employing the staggered implementation of the Chinese carbon ETS across regions and a triple difference approach, we find that carbon ETS has a significantly positive impact on green investor entry. This finding is further verified through dynamic effect analysis and stacked regression. The positive effect of carbon ETS on green investor entry is driven by improved green performance, intensified media coverage, and enhanced environmental disclosure. Furthermore, this effect is more pronounced when firms have higher analyst following, lower financial constraints, lower product pricing power, and are located in regions with higher levels of green finance development. Overall, our findings provide insightful implications for the construction of a unified national carbon ETS in emerging markets.