Dynamic Threshold Effect of Financial Development on the Country Risks–Subsidies–Firm Performance Nexus: Evidence from Chinese Renewable Energy Firms

ABSTRACT

Using multifaceted financial development indicators and a dynamic panel threshold model, this study finds that different regimes of financial development have different effects on Chinese renewable energy firm performance through the interactive channel of country risks and subsidies. A high level of composite financial development strengthens the positive interaction effect between composite risk and subsidies on renewable energy firm performance, and a high level of banking sector development and stock market development, respectively, weakens and strengthens the negative interaction effect between composite risk and subsidies on renewable energy firm performance. Further, these threshold effects of financial development on renewable energy firm performance are also different when using economic, political, and financial risk indicators, and they also change with different ownership attributes. Thus, the Chinese government needs to improve the level of composite financial development and create a stable composite risk environment to achieve fully the potential of subsidies in promoting renewable energy firm performance.

KEYWORDS:

• Country risks
• dynamic threshold effect
• financial development
• government subsidies
• renewable energy firm performance

JEL:

• O10
• O23
• P34
• Q48

Disclosure Statement

The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.

Submission Declaration

This article is original, unpublished, and it has not been submitted to any other journal for review.

Additional information

Funding

The research is supported by the Fundamental Research Funds for the Central Universities of China [JBK2304056].