Energy transition policy, cash flow uncertainty and R&D expenditures of energy enterprises

To cope with risks of increasing climate changes and curb carbon emission, various policies have been implemented to facilitate energy transition in China. However, it remains unclear that whether the cash flow of energy enterprises is affected by energy transition policy and whether they invest more on R&D activities to transition. To answer these questions, we utilize a difference-in-differences method to detect the impact of the Peaking-Carbon-Dioxide-Emissions policy on the cash flow uncertainty of the energy enterprises and examine the interaction between it and R&D expenditures by using the sample of listed energy enterprises in China during 2008-2021. We find that the energy transition policy has a positive effect on the cash flow uncertainty of the energy enterprises, and the higher cash flow uncertainty after the policy further decreases the R&D expenditure of the energy enterprises. We also find that this negative role of the cash flow uncertainty is partially conducted by the reduction proportion of the long-term loan. In addition, the over-valued enterprises have stronger incentives to squeeze the expenses of R&D activities. Last, we capture the heterogeneity that the energy enterprises with less political connections and in more developed areas prefer prudent strategy management to maintain their investments in R&D activities.