Abstract
As an important part of the new environmental governance system in China, the policy effect of Central Environmental Inspection has gained more attention. Based on the data from heavily polluting listed companies in China, this paper examines the impact of Central Environmental Inspection on corporate value by using an event study approach. The result of the study demonstrates that the Central Environmental Inspection causes a general and significant negative impact on the corporate value of heavily polluting listed companies. More specifically, the market value of private firms and small-scale firms declined more than that of state-owned firms and big-scale firms. In addition, under the deterrent of the Central Environmental Inspection, political connections have no longer become the effective way for polluting firms to evade strict environmental regulation.
Highlights
In the space of a few years, China’s efforts to protect ecological environment have been greatly enhanced
To further demonstrate the heterogeneous micro effect of central environmental inspection, we investigated the group of listed companies that was more sensitive to the policy shocks
The results show that the central environmental inspection has a significant negative impact on listed companies in heavy polluting industries and the impact is more obvious in coal mining, ferrous metal mining, chemical, rubber and other industries
Summary
In the space of a few years, China’s efforts to protect ecological environment have been greatly enhanced. Taking the improvement of air quality as an example, the average concentration of PM10 in 338 prefecture-level cities had decreased by 22.7 percent in 2017 compared with 2013. While the average concentration of PM2.5 in Beijing-Tianjin-Hebei region, Yangtze River Delta and Pearl River Delta decreased by 39.6 percent, 34.3 and 27.7 percent respectively. As the core institutional arrangement of environmental governance framework in the new era, the Central Environmental Inspection which was implemented in 2016 directly promoted resolving a large number of long-standing environmental problems It was defined as the regular function of the Ministry of Ecology and Environment established in 2018 which means that it will play a more important role in China’s environmental protection
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