Essays on Environmental Policies, Firm Performance, and Global Supply Chains
- Wang, Hanyi
- Advisor(s): Jacobsen, Mark M.
Abstract
This dissertation investigates the impact of environmental policies on firm performance and global supply chain relationships through three chapters. The first chapter introduces a novel measure of embodied carbon policy costs, incorporating multi-region input-output linkages, to examine the effects of carbon pricing on industrial firm outcomes in Europe. The findings reveal that the inclusion of indirect costs via the global value chain leads to a decrease in firm employment and output, and an increase in total factor productivity and investment, with more pronounced impacts for small and capital-intensive firms.
The second chapter explores the transmission mechanism of sustainable investing on firms' financial performance and real outcomes. Focusing on the prevalent portfolio tilting strategy in practice, we delineate the transmission mechanism from investor preference, intermediated by funds, to underlying firms. Leveraging a 2016 natural experiment for identification, we find that firms with greater exposure to low-sustainability fund ownership experience acute downward pressure on their valuation and equity financing. However, no significant impact is observed on firm debt financing, consistent with our observation that the transmission of investors' pressure for sustainability falls short of generating substantial real impacts on firms' investment decisions.
The third paper examines the impact of environmental regulations on global supply chain relationships using a dataset linking customer firms to their suppliers. The study reveals that customers are more likely to terminate supplier relationships in response to more stringent environmental policies in supplier countries, with the effect being less pronounced for manufacturing customer firms and suppliers located in countries with emissions trading systems. Further analysis shows a relatively limited impact of the average supplier country's Environmental Policy Stringency on customer firms' performance, possibly due to low switching costs and competitive supplier markets.