LAUSR

Abstract Energy deficiency is an important risk factor in the development of the world economy. This study examines whether and how the capital market price affects energy deficiency risk. Energy deficiency, which has become a major problem in China, represents a long-term risk as perceived by investors. We examine whether and how investors perceive and discount long-term risk in pricing energy-related firms, including firms in the energy industry, firms in industries that are highly dependent on energy, and firms headquartered located in regions rich in coal. Using multivariate regression with fixed effect, our study finds that energy-related firms will be priced lower for future energy risks than non-energy dependent firms. Compared with non-energy-related firms, analysts issue more pessimistic opinions in reports for energy-related firms, especially over long horizons. These findings imply that investors perceive the long-term risks of energy deficiency and therefore give discounts when pricing energy-related firms. This study contributes to the literature on the pricing of firms' long-term risk and provides insights into energy policy.