Does social trust affect corporate environmental performance in China?

Abstract

This paper explores whether and how social trust affects corporate environmental performance. Using a unique panel data of Chinese enterprises from 2010 to 2012, we observe that social trust has significant negative effects on corporate pollution. Furthermore, the pollution reduction effect of social trust can be mediated by the increase in institutional quality and economic development and can also be attributed to the reduction of corporate pollution production, consistent with the role of social trust in promoting corporate “pollution prevention” strategies, rather than increasing pollution disposal. We also find that the negative association between social trust and corporate pollution is much stronger for enterprises with private ownership, enterprises with high pollution intensity, and enterprises in eastern coastal areas of China. Our findings emphasize the importance of social trust in environmental protection, especially when formal rules are weak.