Trade policy uncertainty and financial investment: Evidence from Chinese energy firms

This study investigates whether trade policy uncertainty impacts energy firms' financial investments. We find that trade policy uncertainty is negatively related to energy firm's financial investment, thus suggesting that energy firms prefer to reduce financial investment during periods of higher trade policy uncertainty. After adopting several robustness tests, our results remain robust. The negative correlation between trade policy uncertainty and financial investment is more significant in energy firms with less sales revenues, and lower sales growth rates. Meanwhile, energy firms with less serious competition and in areas with higher marketization are more likely to reduce financial investment when trade policy uncertainty increases. Further evidence shows that energy firms are more likely to hold more cash and increase research and development activities when trade policy uncertainty increases.