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<p>Using data from China’s A-share non-financial listed companies from 2009 to 2022, this paper investigates how corporates adjust their environmental investment in response to market demand downturn. We find that market demand downturn significantly curbs corporate environmental investment, primarily by reducing pollution treatment investment (PTI) rather than pollution prevention investment (PPI). The mechanism analysis reveals that market demand downturn reduces corporate environmental investment by lowering operating cash flow, exacerbating financing constraints, and diminishing managerial expectations. Further analysis shows that persistent market demand downturns shift firms’ cuts from PTI to PPI. Additional analysis indicates that the impact of market demand downturn differs by firm characteristics and is moderated by external factors such as regional climate transition risks and public procurement policies.</p>

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Dynamic response of corporate environmental investment under market demand downturn: evidence from China

  • 期刊论文

  • 发表日期：

    2025年9月19日

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  • Yong Wang,
  • Chao Wang,
  • Qingchuan Yi,
  • Qian He

摘要

Using data from China’s A-share non-financial listed companies from 2009 to 2022, this paper investigates how corporates adjust their environmental investment in response to market demand downturn. We find that market demand downturn significantly curbs corporate environmental investment, primarily by reducing pollution treatment investment (PTI) rather than pollution prevention investment (PPI). The mechanism analysis reveals that market demand downturn reduces corporate environmental investment by lowering operating cash flow, exacerbating financing constraints, and diminishing managerial expectations. Further analysis shows that persistent market demand downturns shift firms’ cuts from PTI to PPI. Additional analysis indicates that the impact of market demand downturn differs by firm characteristics and is moderated by external factors such as regional climate transition risks and public procurement policies.