Is government regulation a push for corporate environmental performance? Evidence from China

Abstract

Due to the severe air pollution, the Chinese state issued the new Ambient Air Quality Standard (hereafter new AAQS) in 2012, which requires local governments to control pollution and improve air quality. As such, we take that practice as a quasi-natural experiment to examine the effect of government regulation on corporate environmental performance (CEP). We employ the difference-in-differences (DID) method to conduct an empirical investigation using Chinese listed enterprises’ data from 2008 to 2018. Our findings indicate that the new AAQS significantly promotes the improvement of CEP. However, for enterprises in provinces with less environmental regulatory enforcement and poor environmental information transparency, this effect is weakened. Besides, the influence of the new AAQS reduces when the enterprises are regulated by the government at a greater administrative hierarchical distance to the central state. Our findings offer some critical implications for developing countries to implement government regulation.