Abstract
China has experimented with a wide range of policies to encourage firms to improve their environmental performance, often with mixed results. This paper investigates the effectiveness of combining two different policies at the same time: (1) a more centralised environmental inspection process and (2) new rules on the public disclosure of policy compliance for firms wanting to undertake an initial public offering (IPO). A theoretical framework predicts that a more centralised inspection and public disclosure should improve both a firm's environmental performance and profitability. The results of instrumental variable estimations for 536 listed Chinese firms for the period 2009 to 2019 confirm the theoretical predictions although the positive effect on profitability only lasts for two years after compliance with the IPO requirements. An investigation into possible mechanisms shows that the joint policy promotes investment in green projects while also increasing demand for the firm's products. The findings highlight greater regulatory complexity may be needed if a country wishes to change the behaviour of firms in a manner that is consistent with overcoming environmental challenges.
Original language | English |
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Article number | 107836 |
Number of pages | 12 |
Journal | Ecological Economics |
Volume | 209 |
Early online date | 18 Apr 2023 |
DOIs | |
Publication status | Published - Jul 2023 |
Bibliographical note
Funding Information:Research fundings from the National Natural Science Foundation of China (Grant # 71803193 ) and the Department for Business, Energy & Industrial Strategy (British Academy SG110318 ) are gratefully acknowledged. Special thanks go to Prof James C. Hueng for the advice on constructing the corporate environmental performance index and to Dr Pei Xu for collecting the original dataset. Thanks to the two anonymous reviewers for their suggestions and comments.
Publisher Copyright:
© 2023 Elsevier B.V.
Keywords
- Centralisation
- China
- Environmental regulations
- Firm performance
- Public disclosure
ASJC Scopus subject areas
- Environmental Science(all)
- Economics and Econometrics