Research on the Impact of Climate Policy Uncertainty on Corporate Green Technology Innovation: An Empirical Study from China

Abstract Book of the 19th International Conference on Modern Research in Management, Economics and Accounting

Year: 2026

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Research on the Impact of Climate Policy Uncertainty on Corporate Green Technology Innovation: An Empirical Study from China

Prof. Heng Ma, Pengxin Wei

ABSTRACT:

Faced with growing climate change, government policies aimed at fixing market failures have also created significant regulatory and economic uncertainty. This uncertainty influences corporate strategic decisions. Green technological innovation has become a key ability for firms to adapt and compete in a global environment that values sustainability. This study examines how climate policy uncertainty affects corporate green technological innovation. It uses Prospect Theory and data from China’s A-share listed companies between 2012 and 2023. The main explanatory variable, climate policy uncertainty, is built by multiplying a city-level index—based on analyzing mainstream newspaper reports with a deep learning algorithm—by how often green transition keywords appear in firms’ annual reports. The dependent variable, green technological innovation, is measured as the logarithm of a firm’s total yearly green patent applications plus one. The analysis uses a firm-year fixed effects model. To address endogeneity, an instrumental variable approach is applied. The instrument is the product of city-level pollution and the firm’s green transition index. The first-stage F-statistic is well above 10, showing the instrument is strong. A mediation model tests the mechanism of managerial foresight, which is measured by keyword frequency in annual reports. Regional differences are also examined. The results show that: (1) climate policy uncertainty significantly encourages corporate green innovation, with an economic effect of about 3.4%. This finding holds under various robustness checks; (2) the positive effect mainly works by stimulating managerial foresight; and (3) the effect is stronger for firms in non-eastern regions of China.

Keywords: Climate change challenges;Manager foresight;Prospect theory;Text Analysis