Do state-owned enterprises really have better environmental performance in China? Environmental regulation and corporate environmental strategies

Abstract

Although state-owned enterprises (SOEs) have long been criticized for being inefficient, they play a vital role in realizing social welfare including the improvement of environmental quality. SOEs are controlled by governments, so the motivations and strategies of SOEs to improve corporate environmental performance are distinct from their privately-owned counterparts. In this article, we propose that a unique strategy adopted by SOEs for improving environmental performance is high responsiveness to the government's goal. Using a unique and detailed firm-level dataset, we find that SOEs perform better for the pollutant assessed by government targets while they perform similarly for the unregulated pollutant compared with their privately-owned counterparts, indicating that they are more responsive and accountable for meeting policy requirements. We further find that SOEs worsen their environmental performance after the privatization, which is consistent with the main results. With the privatization of SOEs worldwide, determining how to avoid the negative effects of privatization as well as to motivate for-profit enterprises to improve corporate environmental performance is the key to achieving a win-win.