Abstract
This study aims to shed light on the effects of environmental regulation on China’s eco-innovation driven by investor sentiment and public sentiment from 2003 to 2017. Adopting a text analysis technique and LSTM model, this study identifies the investor sentiment and public sentiment by online comments. We find that environmental regulation has a positive effect on China’s eco-innovation through public sentiment, whereas environmental regulation inhibits China’s eco-innovation through investor sentiment. Second, the regulatory tools of environmental regulation not only improve the public’s enthusiasm and awareness of environmental protection and eco-innovation in China but also bring the pressure to investor survival and continuous innovation. Third, we confirm that the environmental regulation has threshold effects on general public sentiment and investor sentiment for affecting China’s eco-innovation. Based on this result, environmental regulation easily triggers public sentiment for affecting China’s eco-innovation. Furthermore, in order to test whether environmental regulation has spatial spillover effect, by constructing the Spatial Durbin model, this study finds that the environmental regulation has spatial spillover effects on different regions’ eco-innovation in China through two kinds of sentiment. To the policy implication, this study from two kinds of sentiment to guide the environmental regulators would effectively improve the level of eco-innovation in China.
Highlights
Most parts of China are facing resource overdraft and declining environmental quality, and the tension between economic development and environmental protection is becoming increasingly acute
Analyzes the reactions of investor sentiment to environmental regulation news and argues that environmental news makes investors change their strategies in time, which promotes the development of innovation
This study aims to shed light on the effects of environmental regulation on China’s eco-innovation through investor sentiment and public sentiment
Summary
Most parts of China are facing resource overdraft and declining environmental quality, and the tension between economic development and environmental protection is becoming increasingly acute. The theme of environmental protection has received increasing attention in China’s policymakers since 2003 (Song et al, 2020). In this condition, China’s government has implemented various environmental regulations for the environmentally friendly. The Chinese government has issued the Science and Technology Development of National Environmental Protection, which clearly states that the construction of ecological civilization in China urgently needs to rely on eco-innovation to break through the bottleneck of resources and environment. Hojnik et al (2018) state that the eco-innovations are unique and require a good understanding of Environmental Regulation, Sentiment, Eco-Innovation the role of public policy and firm management. Motivation-based factors (regulatory pressure, expected benefits of implementation, and competitive pressure) or input factors (financial resources, technological capabilities) act as a driver to stimulate the eco-innovation development
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