Impact of distance between corporate registration and monitoring stations on environmental performance - Evidence from air quality monitoring stations

Abstract

Several countries are adopting vertical environmental regulations (air quality monitoring stations) to control pollution. However, there is a relative lack of research analysing environmental regulations and performance from a geographic distance perspective. This study introduces atmospheric quality monitoring stations as a type of environmental regulation using data from Chinese listed companies from 2010 to 2019 to determine the effect of monitoring station distance on corporate environmental performance and the moderating role of corporate strategy. This analysis yielded the following findings. First, based on institutional and signalling theories, we find that monitoring station distance inhibits environmental performance. Second, disclosure, digital transformation, and environmental strategies can reverse the negative effects of monitoring stations. Third, while market drivers improve the ability to monitor station distances, political corruption hinders this. Fourth, firm heterogeneity analysis tells us that the “crowding out” effect of monitoring station distance is more significant for state-owned enterprises, high-tech firms, and heavy polluters. Finally, we found that the monitoring role of stations can be fully utilised only if they are established within a certain distance from the enterprise. These findings are important for establishing air quality monitoring stations and corporate environmental performance in developing countries, including China.