Corporate Environmental Investment Research Articles

Research on corporate environmental investment behaviour driven by green credit policies

Research on corporate environmental investment behaviour driven by green credit policies

Artificial intelligence innovation and corporate environmental investment: A contingent view

Existing research has begun to focus on the negative impacts caused by artificial intelligence (AI), but few studies have examined the influence of AI on corporate environmental activities. This study, using 15,779 observations from 3,097 Chinese listed firms from 2008 to 2022, finds that corporate AI innovation has a significant negative impact on CEI. Additionally, we discover that firm size strengthens the negative relationship between AI innovation and CEI, while foreign direct investment (FDI) intensity weakens this negative relationship. This study extends the research on AI in the field of corporate environmentally friendly behavior.

Does environmental regulation truly enhance corporate green environmental investment? Evidence from the supervision of independent directors in listed companies.

With the increasingly prominent environmental issues in China, the government and citizens alike have intensified their focus on corporate investments in green environmental protection. Nevertheless, as government regulations become more stringent, there is substantial debate over whether environmental regulatory policies can consistently encourage listed companies to increase green environmental investments. Simultaneously, independent board supervision plays a crucial role in promoting the compliance and sustainability of listed companies regarding environmental protection. This paper selected a sample of 246 Chinese listed companies from 2010 to 2019, and used a fixed effects model to examine the impact of environmental regulation on the environmental investment of listed companies in China. Moreover, we used a mediation effect model to analyze the role of independent director supervision in influencing the relationship between environmental regulation and companies' green environmental investment. Additionally, we discuss the heterogeneous impact of environmental regulations on corporate environmental investments. Our findings are as follows: first, during the sample period, the tightening of environmental regulations significantly reduces the growth of environmental investment among the studied firms. As government environmental regulatory policies gradually intensify, the negative impact on environmental investments by listed companies becomes increasingly evident. Second, independent directors help alleviate the adverse impacts of environmental regulations on the environmental investment levels of listed companies. This suggests that the inclusion of independent directors in board governance plays a role in assessing government environmental regulatory policies and overseeing corporate decisions related to environmental investment. Lastly, the heterogeneity analysis indicates that environmental regulation significantly negatively impacts the environmental investment of listed companies in pollution-intensive industries and those located in the western regions. Furthermore, environmental regulatory policies impose greater constraints on the environmental investments of small-sized listed companies compared to their large-sized counterparts.

Corporate Greenwashing Unexpectedly Caused by the Green Credit Policy: A Comparison between Environmental Sustainability Information Disclosure and Actual Environmental Protection Investment from China’s Listed Companies

This paper employs a continuous difference-in-differences model to compare environmental sustainability information disclosure with the real environmental investment amount of listed companies in China before and after the implementation of the Green Credit Guidelines, and it investigates the influence of Green Credit Policy on corporate environmental sustainability information greenwashing. The results show that the Green Credit Policy unexpectedly leads to the greenwashing of environmental sustainability information of listed companies. After the implementation of the Green Credit Policy, the amount of positive environmental information disclosed by listed companies has increased faster than that of corporate environmental investment. Further research on the intermediary effect shows that the reason why the Green Credit Policy leads to greenwashing is that the Green Credit Policy greatly reduces the availability of bank credit for enterprises on the restricted list, and these enterprises will relax the financing constraints caused by the policy in the future and thus adopt the greenwashing behavior. Heterogeneity analysis shows that these effects become smaller in state-owned enterprises and enterprises with large commercial financing scales, as they are less affected by financing constraints of the Green Credit Policy. The policy goal of the Green Credit Policy is to limit the financing of polluting projects and promote the sustainable development of enterprises. However, by comparing the corporate environmental sustainability information disclosure and the actual amount of environmental investment, this paper finds that the Green Credit Policy has unexpectedly led to corporate greenwashing. This result goes against the policy goal of sustainable development. Commercial banks should be more cautious about the environmental sustainability information voluntarily provided by enterprises to correct these distorted results.

Corporate strategic aggression and environmental investment decisions: Evidence from A-share listed firms

Corporate strategy greatly influences corporate investment activities. This study seeks to better understand the relationship between the level of corporate strategic aggression and environmental investment decisions based on 2011–2020 data. We find that increasing the intensity of strategic aggression effectively increases environmental investment. Moreover, this effect is incentivized by good corporate environmental, social, and governance performance, innovation ability, and management tone manipulation. Although financing constraints may hinder the positive effects of corporate aggression on environmental investment, independent directors and corporate risk promote maximum positive effects. These findings enable companies to identify strategically motivating factors for improving environmental protection.

Can green finance policies accurately promote corporate environmental investment?—a comprehensive evaluation from multiple aspects

The 28th United Nations Climate Change Conference, held in the United Arab Emirates at the end of November 2023, stated that climate action cannot be delayed and the financing and investment situation for adapting to climate change needs a qualitative leap. Vigorously developing green finance is one of the important ways to achieve this goal. The core question of this paper is: Can green finance policies promote enterprises’ environmental investment? This article uses the formal implementation of the “Green Credit Guidelines” in 2012 as a quasi-natural experiment, bases on the micro data of A-share listed companies from 2004 to 2020, and adopts the difference-indifferences propensity score matching method (PSM-DID) to explore the role of green credit policy in guiding corporate environmental protection investment from multiple dimensions. The research shows that the implementation of the “Green Credit Guidelines” has promoted corporate environmental protection investment to a certain extent, and the conclusion still holds after a series of robustness tests. Heterogeneity tests found that the impact of green credit policy on corporate environmental protection investment varies significantly among different ownership enterprises and enterprises in different regions. Further research shows that the Green Credit Guidelines are regulated by macro and meso factors. From the perspective of mechanism, this paper finds out the mechanism of promoting enterprises’ environmental protection investment at the micro level. At the macro level, economic policy uncertainty and monetary policy tightening affect the degree of corporate environmental protection investment. At the meso level, the government’s attention to environmental protection determines the behavior of local enterprises, which in turn affects the attitude of enterprises towards environmental protection investment activities. At the micro level, the implementation of green credit on the one hand exacerbates the problem of corporate financing constraints, making companies have incentives to invest in environmental protection to alleviate this problem. On the other hand, it will also promote changes in innovation and capital factors in enterprises, directly increasing corporate environmental protection investment. This paper is helpful for the theoretical circle and management departments, so as to provide reference for the government to issue relevant policies.

How does environmental performance feedback affect corporate environmental investment? The moderating role of environmental regulation

The research on how environmental performance feedback (EPF) affect corporate environmental investment (EI) is in infancy. We divide EPF into positive and negative EPF and examine the effects on EI. We further study the moderating roles of environmental regulation. By using panel data of listed manufacturing companies in China, we find positive EPF negatively affects EI, whereas negative EPF positively affects EI. Mandatory environmental regulation strengthens the relationship between negative EPF and EI, while voluntary environmental regulation weakens the relationship between negative EPF and EI. Furthermore, we find the impact of EPF on EI is heterogeneous.

Outward Foreign Direct Investment and Corporate Environmental Investment: Competition or Cooperation?

China is currently in a crucial phase of establishing a new domestic and international “dual circulation”, and a new model of sustainable development. OFDI and environmental investment play significant roles in both external and internal economic cycles. In this study, we constructed a multi-period difference-in-differences (DID) model, using data from listed companies in China from 2008 to 2022, to analyze how OFDI impacts domestic environmental investment and its underlying mechanism. The findings demonstrated that OFDI can significantly reduce the environmental investment made by domestic enterprises. There exists a capital competition relationship between these two activities due to financing constraints, although OFDI can mitigate environmental issues by reducing pollution emissions and promoting industrial structure upgrading within the home country, resulting in savings on environmental investments. Heterogeneity analysis revealed that the negative impact of OFDI on environmental investment is primarily observed in non-state-owned enterprises, firms investing in developed countries, and those subject to strict environmental requirements imposed by host governments. This study explains the internal logic of China’s environmental investment reduction from the perspective of OFDI, deepens the study of the environmental consequences of OFDI, broadens the applicable boundaries of the theory of OFDI’s impact on environmental investment, and provides insights for the government to establish a high-level opening-up pattern and address the dilemma of environmental governance.

Retail investor activism and corporate environmental investments: evidence from green attention

Retail investor activism and corporate environmental investments: evidence from green attention

Green bond and corporate environmental investment: The moderating effect of environmental concern

As global awareness of climate change and environmental protection deepens, the green bond market has experienced rapid growth. This study utilizes data from heavily polluting companies listed on China's A-share market from 2010 to 2022 to examine the relationship between green bond, environmental concern, and corporate environmental investment. Empirical findings reveal: (1) There is a positive correlation between green bond and corporate environmental investments; (2) Environmental concern acts as a moderator between green bond and corporate environmental investments. (3) Heterogeneity analysis indicates that the promotive effect of green bond on environmental investments is more pronounced in state-owned enterprises and companies located in the eastern region.

Does tax enforcement reduce corporate environmental investment? evidence from a quasi-natural experiment

The transition to a green, sustainable economy is largely reliant on corporate investment in the realm of environmental protection. Utilizing the adoption of the third phase of the Golden Tax Project (GTPIII) in China as a quasi-natural experiment, this paper examines how corporate environmental investment changes in response to greater tax enforcement. Our results reveal that tougher tax enforcement significantly lowers corporate environmental investment. Such an effect is stronger for firms faced by high financial constraints and those operating in non-heavy-polluting industries. Moreover, the mechanism analysis indicates that the higher tax burden induced by greater tax enforcement is the potential channel. Overall, this paper shows that stricter tax enforcement could potentially result in adverse spillover effects on corporate environmental investment, which warrants attention in tax collection practices.

A Study of the Impact of Informal Board Hierarchy on Corporate Environmental Investments

Using a sample of non-financial firms listed in Shanghai and Shenzhen A-shares from 2014-2021, this paper examines the impact of board informal hierarchy on environmental investment and explores the moderating effect of media attention on the relationship between the two. The regression results show that board informal hierarchy is significantly and positively related to firms' environmental investment, and the relationship between board informal hierarchy and firms' environmental investment will be facilitated when firms receive more media coverage.

Does internal control affect corporate environmental responsibility? Evidence from China

PurposeThis study examines the relationship between internal control and corporate environmental responsibility.Design/methodology/approachUnlike US studies that concentrate solely on internal control over financial reporting, this study uses a comprehensive index that encompasses internal control over financial reporting, operations, and compliance. Corporate environmental responsibility is measured by environmental investments. Our research sample comprises Chinese listed firms from 2010 to 2018.FindingsThe results demonstrate a positive correlation between internal control and corporate environmental investments. Furthermore, we find that firms with high-quality internal control can improve their financial and environmental performance through environmental investments. After decomposing internal control into its five components, we show that the control environment, control activities, and information and communication components exhibit stronger effects on environmental investments than the risk assessment and monitoring components. Finally, the cross-sectional analyses reveal that the positive effect of internal control is more pronounced in private firms and in firms that are subject to weaker environmental regulation.Originality/valueBy focusing on the effect of a comprehensive internal mechanism on corporate environmental responsibility in China, this study contributes to the literature in developed-country settings that overwhelmingly focuses on the impact of external stakeholders and regulations.

Environmental regulatory system reform and corporate ESG ratings: Evidence from China

As China continues to deepen its reforms, it remains to be explored the potential impact of environmental regulatory system reform on corporate concept of sustainable business. Although existing literature has explored factors influencing corporate ESG ratings, little attention has been paid to the impact of environmental regulatory system reform. Based on the data of Chinese A-share listed firms from 2012 to 2021, we examine the impact of CEPI on corporate ESG ratings by using a multi-period difference-in-differences model. The findings suggest that CEPI significantly enhances corporate ESG ratings. The main channel is through increasing corporate environmental investment. The promotional effect of CEPI on corporate ESG ratings is particularly pronounced in companies with high industry competition, high media attention, and those prone to “government-enterprise collusion.” These findings contribute to understanding the micro-level effects of environmental regulatory system reforms and provide valuable insights for other developing countries to improve corporate ESG ratings.

Green finance and corporate environmental investment: "Scale Up" or "Efficiency Up"?

The establishment of green finance reform and innovation (GFRI) pilot zone is an important measure of the Chinese government to urge enterprises to develop green transformation. This paper explores the impact of pilot policies in the GFRI pilot zone on corporate environmental investment. Based on 819 A-share listed enterprises from 2010 to 2020, our staggered difference-in-differences (staggered DID) estimation documents revealed that enterprises in the GFRI pilot zone significantly increased the corporate environmental investment efficiency but reduced the scale of corporate environmental investment.This conclusion remained robust after Propensity Scores Matching difference-in-differences (PSM-DID), replacing dependent variables, and shortening the time window. We contend that the increased research and development (R&D) expenditure and technological innovation are the potential mechanisms at work. Heterogeneity analysis showed that the establishment of GFRI improved the environmental investment efficiency of polluting enterprises but had no effect on green enterprises.Meanwhile, the effect of GFRI exhibited heterogeneity in the type of enterprise ownership. This paper evaluates the implementation effect of GFRI from the perspective of corporate environmental investment, and provides theoretical support and an empirical basis for green finance policy to serve China's green economy.

Assessing the determinants of corporate environmental investment: a machine learning approach.

In recent years, experts and academics in the environmental managementfield have developed an interest in the factors and evaluation techniques that influence corporate environmental investment decisions. However, there are substantial differences between studies employing the most recent evaluation methodologies and those that use indicator systems. To explore the mechanisms that influence corporate environmental investment, this study investigated the determinants of environmental investment through the perspectives of firm, board, chair, and chief executive officer (CEO) characteristics using a machine learning approach. Based on a large-scale data sample from Chinese-listed companies, the results indicated that the extreme gradient boosting (XGBoost) model had an accuracy of up to 97.63%, thus performing the best. Additionally, the model that used SHapley Additive exPlanations (SHAP) to interpret XGBoost showed that a company's sales performance was the most important factor that influenced environmental investment, followed by CEO tenure,board independence, board gender diversity, chair academic experience, and the company's level of internationalization. Furthermore, when examining the sample of heavily polluting enterprises, sales, board gender diversity, CEO tenure, chair academic experience, board independence, and chair-CEO duality, all were found to play crucial roles in predicting environmental investment. Overall, this study aids in evaluating the factors that influence corporate environmental investment decisions and provides policymakers and practitioners with a machine learning approach for use when assessing these factors.

The impact of China’s new Environmental Protection Law on corporate environmental investments

As an important lever for China’s green development strategy, whether the new Environmental Protection Law can effectively form investment incentives for enterprises has attracted much attention and is also an important topic that theoretical research urgently needs to explore. This paper utilizes corporate data from non-financial listed companies in Shanghai and Shenzhen A-shares from 2007 to 2018. By adopting a double-difference model, it explores the incentive role and internal mechanism of the new Environmental Protection Law (EPL), implemented in 2015, as an environmental regulation on the environmental protection investment of enterprises, taking the new EPL’s enactment as a quasi-natural experiment. The study revealed a noteworthy and positive impact on motivation, which remained consistent even after various robustness tests. Additionally, the impact of incentives varied depending on the level of competition within the industry, financial constraints, and ownership type of the enterprises. Investigating the mechanism, it has been discovered that the incentive effect advances the environmental investment of firms through diminishing agency costs, enriching the quality of environmental information disclosure, and facilitating government subsidies to enterprises. This study not only verifies, from the factual empirical level, that environmental regulation policies can promote corporate environmental investment but also provides important evidence to support to a certain extent that the implementation of the new EPL can promote enterprises’ environmental governance behaviors. This article reveals the microeconomic effects of the new Environmental Protection Law from the perspective of corporate behavior strategies, and the research conclusions have important reference significance for the construction of national legal systems and the deepening of green development strategies.

The role of environmental justice: Environmental courts, analysts' earnings pressure and corporate environmental governance

The dampening impact of analysts' earnings pressure on corporate environmental performance has gradually attracted attention. Environmental judicial specialization may be an effect way to alleviate managers' earnings obsession and impel corporate environmental governance in emerging economies. Using a panel data of listed companies in China, this study mainly explores the impact of analysts' earnings pressure on corporate environmental governance and the moderating role of environmental courts on this effect from the perspective of environmental judicial specialization. We discover that: (1) the rise of analysts' earnings pressure will urge managers to cut environmental governance investment, and this effect is more prominent for firms with higher profits volatility, higher stock turnover, and lower analyst coverage; (2) environmental courts weaken the detriment of analysts' earnings pressure on corporate environmental investment; (3) the moderating role of environmental courts is especially prominent in firms with higher economic contribution and firms subjected to weaker environmental regulatory intensity. Furthermore, the establishment of environmental courts mitigates the detriment of analysts' earnings pressure on non-financial environmental disclosure. Our findings have great significance for firms plagued by earnings pressure and regulators involved in ecological governance.

Why does economic policy uncertainty increase firm-level pollutant emission?

Previous studies show that economic policy uncertainty (EPU) reduces corporate pollutant emission via suppressing economic activities. In contrast to these findings, this study examines firm-specific pollutant emission capturing various pollutant-containing gases and finds that greater EPU increases corporate pollutant emission in China due to less restrictive environmental regulation or reduced corporate environmental investment. The effect of EPU on pollutant emission is more pronounced for firms located in regions with less intensive environmental regulation. Furthermore, non-state-owned enterprises are more sensitive to economic policy shocks and more likely to increase their pollutant emission when facing high EPU. The findings highlight the importance of understanding corporate strategic responses under EPU that shape their corporate social responsibility behaviors.

Analyst monitoring and information asymmetry reduction: U.S. evidence on environmental investment

This study examines the connection between analyst coverage and environmental investment using firm-level data from the S&P 500 spanning 2001 to 2022. There is still an unclear and missing piece in the literature of the U.S. evidence investigating the impact of external analysts on monitoring corporate sustainable development. Building upon prior research and filling in the gap, this study proposes that analyst coverage can affect corporate environmental investment and reduce information asymmetry. The findings demonstrate that analysts act as external monitors, reducing information asymmetry and enhancing environmental investment. To strengthen the main conclusions, the study utilizes various robustness tests, including propensity score matching (PSM), 2SLS instrument variable approach, and subsample analysis. In aggregate, the study contributes to the growing body of literature on the important monitoring role of analysts in promoting sustainable business practices and reducing information asymmetry. It offers valuable insights for policymakers and investors to promote sustainable practices and reduce information asymmetry.