Abstract
This study examines selected companies in China from 2012 to 2017 matched with provincial air quality index data and uses ordinary least squares regression to examine the relationship between environmental regulation, air quality, employee compensation, and corporate performance. The study found that, first, environmental regulation has eliminated heavy polluting enterprises and promoted the upgrading of enterprise equipment through the cost increase effect, thereby improving regional air quality. Second, good air quality can increase non-monetary benefits for employees, so that corporate employees' monetary compensation can be kept at a low level. Third, in the aforementioned context, with the significant reduction in employee compensation, corporate performance has increased. This study expands the research on the impact of environmental regulation on corporate behavior and enriches the theoretical literature on employee compensation management. Furthermore, to alleviate the adverse effects of high employee compensation on corporate performance under severe air quality, it provides recommendations moving forward. In addition, this study provides empirical evidence for the development of the concept of “lucid waters and lush mountains are invaluable assets” from the perspective of labor cost.
Highlights
Since the economic reform and opening up in 1978, China’s economy has made significant progress
This study explores the relationship between environmental regulation, air quality, employee compensation, and corporate performance as the previous literature rarely considers the environmental benefits brought by environmental regulation and the employee compensation management behavior in the context of environmental benefits
This study explores whether environmental regulation can affect the relationship between air quality and employee compensation and whether the resulting changes in employee compensation can have a significant impact on business performance
Summary
Since the economic reform and opening up in 1978, China’s economy has made significant progress. This study combines employee compensation management from the perspective of non-monetary benefits to explore the impact of environmental regulation on corporate performance, enriching the existing research. This study explores the relationship between environmental regulation, air quality, employee compensation, and corporate performance as the previous literature rarely considers the environmental benefits brought by environmental regulation and the employee compensation management behavior in the context of environmental benefits. To retain employees, enterprises will increase their monetary compensation to compensate for the low non-monetary benefits caused by poor air quality This will significantly increase the cost of business and adversely affect the company’s performance. This study explores whether environmental regulation can affect the relationship between air quality and employee compensation and whether the resulting changes in employee compensation (labor cost) can have a significant impact on business performance. The relationship between economic development and the in-depth implementation of environmental governance has certain reference value
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