Greening through courts:Environmental law enforcement and corporate green innovation

Abstract

Environmental laws represent significant external factors influencing corporate green behavior. Previous research has predominantly concentrated on assessing the role of environmental courts in mitigating the effects of environmental pollution. Leveraging the establishment of environmental courts in China as a quasi-natural experiment, this study investigates whether environmental law enforcement can promote corporate innovation. Our findings indicate that the establishment of environmental courts can significantly enhance the green innovation of heavily polluting firms, primarily through mechanisms related to environmental pollution cost pressure and R&D investment. The promoting effect of environmental courts on corporate green innovation is particularly pronounced in state-owned enterprises, large-scale enterprises, and firms receiving government green subsidies. Conversely, this effect is attenuated in the western regions of China and in areas with lower public environmental concerns. This study offers a novel perspective on understanding green innovation and provides policy implications for managing environmental courts.