Abstract
Today, environmental protection has become a global issue, and various environmental regulations have been actively adopted. However, are these measures promoting or harming enterprise values? Is this effect the same for enterprises with different ownership backgrounds? In order to address these problems, we conducted an empirical analysis of China’s A-share market to investigate the relationship between the New Environmental Protection Law (NEPL) launched in China and corporate financial performance, and further explore the impact of environmental supervision intensity (ESI) from the perspective of ownership. The empirical results show that there is a negative correlation between NEPL and the financial performance of high pollution enterprises. Further analysis demonstrates that there is an inverted U-shape relationship between ESI and corporate financial performance for both state-owned enterprises (SOEs) and non-state-owned enterprises (non-SOEs), while the financial performance of SOEs is more sensitive and tolerant to environmental regulation than that of non-SOEs. Finally, we make recommendations for the future direction of China’s ecological civilization construction and sustainable development of enterprises based on three aspects: environmental awareness, policy considerations, and sustainable development. The innovation of this paper lies in putting NEPL and corporate financial performance in the same analytical framework for the first time, which enriches the research in this field. Meanwhile, it provides a new perspective for understanding the relationship between ESI and corporate financial performance through the analysis of nonlinearity and owner heterogeneity.
Highlights
Environmental problems, such as pollution, resource depletion, and biodiversity destruction have increasingly become the focus of global concern [1,2,3]
We find that environmental supervision intensity (ESI) does not inhibit enterprise performance, but shows an inverted U-shape effect
We examine the influence of ESI on high-polluting enterprises (HPEs) and low-polluting enterprises (LPEs) of non-state-owned enterprises (SOEs)
Summary
Environmental problems, such as pollution, resource depletion, and biodiversity destruction have increasingly become the focus of global concern [1,2,3]. Existing literature mainly focuses on the impact of environmental regulation on the productivity or innovation of enterprises, as well as the relationship between environmental management and economic performance, but rarely considers the direct impact of environmental regulation on corporate financial performance, in particular the effect of the NEPL. In order to better understand the relationship between environmental regulation, namely the NEPL and ESI in this paper, and corporate financial performance, our paper starts from the perspective of ownership heterogeneity. To evaluate the impact of environmental regulation on corporate financial performance and further investigate the heterogeneous effect under different ownership backgrounds, we use quarterly data of China’s A-share listed companies from 2012Q1 to 2019Q3 for the empirical analysis.
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