Abstract
The promotion of renewable energy cannot be separated from the support provided by government subsidies. However, the effect of government subsidies is controversial. Taking China’s listed renewable energy companies as examples, this paper analyzes the impact of government subsidies on the financial performance of these companies. The results show that government subsidies do not promote improvements in corporate financial performance, and renewable energy companies are less profitable than other companies. The negative effect of government subsidies on corporate financial performance can be explained mostly by the rent-seeking behavior of firms. The occurrence of subsidy-induced overcapacity and adverse selection and moral hazard created by asymmetric information also weaken the incentive effect of government subsidies to some extent.
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Notes
New energy here includes wind, solar, nuclear, biomass, geothermal.
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Acknowledgements
This work is supported by funding from National Natural Science Foundation of China (Nos. 71673026, 71642004, 71521002, 71322306, 71273027), China’s National Key R&D Program (2016YFA0602801), Joint Development Program of Beijing Municipal Commission of Education and the Fundamental Research Funds for the Central Universities. We appreciate the comments and constructive suggestions from the anonymous referees.
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Zhu, Z., Liao, H. Do subsidies improve the financial performance of renewable energy companies? Evidence from China. Nat Hazards 95, 241–256 (2019). https://doi.org/10.1007/s11069-018-3423-8
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DOI: https://doi.org/10.1007/s11069-018-3423-8