Abstract
Ecological deterioration and environmental damage brought by high-speed economic growth in China caused high attention. Environmental administrative penalty is a powerful way for the government to realize environmental pollution control. When a firm is subjected to environmental administrative penalties, how the penalty affects operating cash flows is an important issue of concern to academic and practical circles. This paper examined the relationship between the environmental administrative penalty and the firm’s operating cash flow by using the ordinary least square method. It is found that environmental administrative penalty significantly decreases the firm’s operating cash flow in the following year. To increase the robustness of the result, the potential endogenous problems have been eliminated by using the two-stage least squares method. We found that the negative effect still exists. The finding increases the understanding of how environmental administrative penalties affect the firm operation and have practical enlightenments to corporate environmental management and environmental pollution control.
Highlights
Severe ecological deterioration and environmental damage brought by high-speed economic growth in China caused high attention at home and abroad
This study examines the impact of the environmental administrative penalty on cash flow
We found that there is a negative relationship between environmental administrative penalty and operating cash flow
Summary
Severe ecological deterioration and environmental damage brought by high-speed economic growth in China caused high attention at home and abroad. How environmental administrative penalty affects a firm’s operating cash flow, is an important issue of concern to practical circles. The tax breaks, subsidies, electricity and water concessions received by companies as a result of previous green production, as well as the government's preferential right to purchase, maybe negatively affected after being penalized. Previous studies focus on corporate financing and lack of attention to the effect of environmental penalties on expected operating cash flow. Will environmental administrative penalties reduce the firm’s operating cash flow? This study helps to identify the economic consequence of environmental administrative penalties from the perspective of corporate cash flow, which has strong practical enlightenment to the practice of corporate environmental management and government environmental regulation
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
