Epidemic disasters and corporate green investment

Abstract

While most countries have been adopting strategies to boost economic growth after the coronavirus disease 2019, this paper cautions that we may underestimate the influence of epidemics on sustainable development. With micro evidence from mainland China, we show that the intensity of epidemic disasters during the last feudal period (1644–1895) across prefectures has a long-term effect and reduces corporate green investment in 2009. These findings are robust to geographic, institutional, cultural and unobservable factors, and potential endogeneity bias. We further show that risk-taking propensity mediates the relationship between epidemic intensity and corporate green investment, with robustness to confounding mechanisms. These findings justify that epidemics in hundreds of years ago constrain contemporary corporate green investment in the modern society by breeding a culture of risk-taking. Therefore, this paper suggests to design governmental policies for green investment with historical endowment and cultural context.