Effects of Carbon Emission Trading on Companies' Market Value: Evidence from Listed Companies in China

Emissions trading schemes (ETSs) are effective measures that facilitate economic growth and carbon mitigation, especially for developing countries such as China. These schemes can further affect the cash flow, production, and investment decisions of regulated companies. However, few empirical studies have explored how ETSs promote companies' market value. We systematically evaluate the influence of the carbon emission trading (CET) policy on companies' market value and explore the influential mechanism. We use the data of listed companies from the Chinese stock "A" markets and employ the difference-in-difference method to account for the unobserved cause of the CET policy regarding companies' market value. Robust benchmark regression results reveal that the CET policy promotes companies' market value significantly. The mechanism analysis reveals that the CET policy can improve the market value of listed companies by influencing the carbon price, innovative activities, and carbon disclosure. The results of the heterogeneity analysis show that the CET policy's impact on companies' market value is heterogeneous in terms of marketization degree, industry, firm ownership, and different regions. We suggest that the carbon pricing mechanism, degree of market perfection, carbon disclosure policy, and carbon finance should be optimized to improve the efficiency of ETSs.