The long-term effects of transformation and upgrading policies on the market performance of China's coal-fire power generation industry

Transformation and upgrading of traditional energy industries have increasing theoretical and practical relevance in today’s economic orientation of sustainable development. Many governments have tried to issue a batch of transformation and upgrading (TFU) policies with the hope of guiding traditional enterprises’ smooth change. However, there is a dearth of systematic research on the long-term effects of TFU policies, which is not conducive to improving those policies. This paper aims to study what TFU policies generate to concerned traditional energy enterprises in the long run from a perspective of capital asset pricing. Taking China’s coal-fired power generation industry, the typical and the largest traditional energy industry, as the sample, 318 TFU policies issued by the Chinese government and the relevant data of A-share listed coal and thermal power enterprises in the industry were collected. The Latent Dirichlet Allocation model was employed to categorize the TFU policies into six types, and then the Jensen alpha model was built to test the long-term effects of each type of TFU policy at varying lagged periods. The results show that under all the types of TFU policies, the Jensen alpha values of both coal and thermal power stock portfolios are significantly negative at each lagged period, implying negative long-term effects. Further statistical analysis shows that the Jensen alpha values of central state-owned enterprises (SOEs) are stochastically larger than those of local SOEs under most types of TFU policies, indicating that central SOEs are generally less negatively affected. Moreover, the varying characteristics of the Jensen alpha values between coal and thermal power portfolios and between central and local SOEs were discussed.