ABSTRACT
We study the causal impact of precipitation risks on corporate water consumption decisions by combining daily precipitation data in mainland China with industrial firm water use data from 1998 to 2013. Using a large sample yielding precise estimates, we find that precipitation shocks significantly impact a firm's water usage, in which the higher the risk of precipitation, the less water is used by firms. Furthermore, we find that this water-saving effect is largely driven by potential extreme drought. We also use city-level data to demonstrate that precipitation is an important driver of corporate water-saving measures. The water-saving effects of precipitation uncertainty and extreme precipitation have particularity in areas that are more sensitive to precipitation and high-water-consumption industrial enterprises. Finally, the results reveal that firms mainly realize the water-saving effect of precipitation risk through technological improvement, reduction of wastewater discharge, and abbreviation of investment and production scale.
ABSTRACT
Using data from non-financial listed firms in China from 2008 to 2020, this study investigates the effect of the new Environmental Protection Law on corporate financialization based on the difference-in-differences model. Findings show that the law's implementation significantly increases the financialization behaviors of corporations in polluting industries. This effect remains robust after a series of robustness checks. Heterogeneity analyses suggest that the policy effect of the law is more pronounced for non-state-owned enterprises, enterprises with high fixed assets ratios, and enterprises in regions with excellent market competition. The new Environmental Protection Law also promotes the financialization of enterprises by increasing costs, reducing commercial credit financing capabilities, increasing risks, and hindering innovation. This article provides new evidence for understanding macro-environmental regulation and micro-firm effects.
