How does environmental policy uncertainty influence corporate green investments?

Although environmental policy uncertainty is becoming prominent in emerging economies, such as China, the existing literature ignores its effect. In this study, we divided environmental policy uncertainty into policy content uncertainty (PCU) and policy enforcement uncertainty (PEU) and examined the influence of environmental policy uncertainty on corporate green investments based on survey data from Zhejiang Province, China. The results show that environmental policy uncertainty, regardless of PCU or PEU, can significantly inhibit corporate green investments. We found that executives' environmental awareness could not increase corporate green investments but significantly moderated the relationship between PEU and corporate green investments. We conclude that the government should keep environmental policies stable and enhance the capacity to develop policy enforcement priorities to ease PEU and improve the effectiveness of environmental policies.