Impact of air pollution on corporate investment: New empirical evidence from BRICS

Abstract

The current analysis aims to explore the impact of air pollution on corporate investment decisions. The empirical analysis was conducted on non-financial sector enterprises of BRICS economies. We employ the system generalized method of moments (GMM) model to establish the regression among variables. The statistical analysis reveals the negative and statistically significant impact of air pollution on corporate investment. The underlying logic of the adverse effect is that the high air pollution enhances compliance costs, creates financial constraints to finance investment activities, and augments operation risk, etc. The empirical analysis yields an important policy i.e., ensuring green production activities by corporate managers will not only reduces environmental pollution but will also impede environmental stress. Similarly, policy officials should devise efficient environmental policies that can help in keeping air pollution at the lowest level. This study complements the existing literature by exploring the novel relationship between air pollution and corporate investment.

Keywords

• G31
• Q53