Abstract
This paper creatively studies the impact of the environmental governance on corporate performance in the context of China. We take the first round of central environmental inspections as the quasi-natural experiment shocks, and then test its effects on Chinese listed companies’ performance using the propensity score matching method and the difference-in-differences with multiple periods method. Furthermore, we discuss the transmission mechanism between central environmental inspections and corporate performance. The results indicate that central environmental inspections have significantly improved the corporate performance of listed companies in polluting industries in the inspected provinces. The central environmental inspections reduce agency costs and enhance corporate performance by improving the internal agency problems of listed companies. In addition, state-owned and large-scale companies are more sensitive to the central environmental inspections, and the effect of corporate performance improvement is more obvious. However, in regions with different levels of environmental regulations, there is no significant difference in the effects of central environmental inspections on the improvement of corporate performance.
Highlights
The global economy has experienced rapid development after World War II
This study applies the multi-period propensity score matching (PSM)-DID model to empirically test whether central environmental inspections can improve corporate performance by considering 2,256 listed companies in China’s Shanghai and Shenzhen A-share exchange markets
The research conclusions are as follows: (1) Central environmental inspections can significantly improve the corporate performance of listed companies in heavily polluting industries, and the results are still significant under the robustness test
Summary
The global economy has experienced rapid development after World War II. the economic boom is at the cost of resource consumption and environmental pollution, which has caused increasingly noticeable ecological problems (Ren et al, 2022). This paper is designed to study the measures that government takes to achieve environmental goals and their impact on corporate performance of companies in polluting industries. To achieve green and low-carbon ecological civilization development, the central government has revised and issued several environmental protection laws and regulations to punish corporate pollution violations severely. To solve the current dilemma facing environmental regulatory policies, the Ministry of Ecology and Environment of China has launched five batches of central environmental inspections in 31 provinces, autonomous regions, and municipalities across the country since 2016, urging corporations to effectively rectify pollution violations while taking the initiative to accept environmental protection responsibilities. To respond to the supervision of the central environmental inspection team, listed companies in heavy-polluting industries are bound to adopt corresponding environmental protection measures to reduce corporate pollution. The negative impact of the first method on corporate performance is self-evident, whereas the impact of the latter two methods requires empirical testing combined with actual conditions to draw definite conclusions
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