Do renewable energy policies exacerbate corporate information uncertainty?

This study analyzes the impact of state-level renewable energy policies and incentives on the corporate information environment in the US. It considers these renewable energy policies and incentives as exogenous measures of firm-level renewable energy exposure. The findings indicate that such policies and incentives significantly increase firms' adoption of renewable energy, confirming their suitability as proxies for external shocks. Additionally, they contribute to increased variability in firms' financial performance. The study demonstrates a positive correlation between performance variability and information uncertainty, particularly in industries that rely heavily on renewable energy. Overall, the findings underscore the imperative for strategically designing policy implementation timelines that balance achieving sustainability goals. The positive association between the percentage of renewable energy electricity production and the information uncertainty indicates that swift shifts to renewable energy sources can impair the firm information environment.