Government‐enterprise collusion and public oversight in the green transformation of resource‐based enterprises: A principal‐agent perspective

Abstract

AbstractIn this work, by constructing a principal‐agent model, we analyze the intrinsic causes of collusion between the government and enterprises, particularly through the central and local governments and resource‐based enterprises. The analysis has been conducted by introducing the public as a third‐party monitoring body to explore the positive role of public participation in preventing collusion between the government and enterprises, and henceforth entailing model analysis and validation with certain examples. The green transformation of resource‐based enterprises is an effective way for their sustainable development, besides being an inevitable requirement for China's high‐quality economic development and ecological civilization construction in the new era. In this perspective, our study reveals that: (1) Government‐enterprise collusion is motivated by the central government's improper assessment and incentive mechanism, besides the information deficit between the central government and the colluding parties. (2) The conditions for government‐enterprise collusion in development remain on the resource‐based enterprises and local governments that face fewer expected penalties than expected benefits, thus resulting in lower collusion risks. (3) Public participation in monitoring can effectively combat the willingness of the local governments and resource‐based enterprises to collude and significantly increase the level of effort of both parties in the green transition. (4) Public monitoring increases the probability of collusion detection, and prompt detection improves the timeliness and effectiveness of punishment. The findings from this study can provide a scientific basis for improving the regulatory system, thus improving public participation and strengthening the penal system.