Corporate Environmental Investment Research Articles

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.

Is corporate environmental investment a strategic risk management tool? Evidence from short selling threats

This study examines whether corporate environmental investment is employed as a strategic management tool in response to short-selling threats. Using a difference-in-differences approach, we find that corporate environmental investment increases in response to short-selling threats in threatened firms. The impact is more pronounced for firms with greater financial opacity and lower institutional ownership, which is consistent with the risk management hypothesis. Furthermore, we document that companies tend to increase their environmental disclosure in complement to the increase in environmental investment. We also find significant increases in environmental voluntary over regulatory investment after the firms have been added to the short-selling list. Additional analysis suggests that environmental investment reduces overinvestment and investment inefficiency, and it is negatively associated with stock price crash risk.

The effect of economic incentives on corporate environmental investment: Evidence from Chinese manufacturing listed firms

Different from most studies that analyze command-and-control policies, our paper quantitatively evaluates the effectiveness of one type of economic incentive – environmental subsidies for stimulating corporate environmental investment. Using a representative sample of Chinese manufacturing listed firms, we find that environmental subsidies provided by the government significantly increase corporate environmental investment. The effect of environmental subsidies is also higher for smaller firms and private firms. Moreover, we also find that environmental subsidies have a significant and positive effect on both cleaner production and end-of-pipe investment, with the effect on cleaner production being greater. Further exploration reveals that government subsidies are a signal of endorsement that contributes to increments in firms’ innovation and financial capacity, which encourages an increase in corporate environmental investment.

The Effect of Local Government Environmental Concern on Corporate Environmental Investment: Evidence from China

This paper uses machine learning tools to construct local government environmental concern indicators and empirically examines the impact of local government environmental concern on corporate environmental investment. From the resource endowment perspective, corporate resources’ moderating role is also verified. The major findings are as follows: (1) local government environmental concern has a significant positive effect on the environmental investment of corporations in their jurisdictions; (2) corporations with fewer financial and political resources will pay more attention to the local government’s intention when making environmental investment decisions, and the promotion effect of local government environmental concern on the environmental investment of such corporations is more prominent. Further analysis shows that this promotion effect is more significant in regions with a high intensity of environmental regulation and high levels of economic development, and is more effective for key regulated corporations. This paper verifies the effect of local government on micro-corporations in environmental governance from the perspective of environmental concern, broadens the boundary of research on the relationship between government and corporate environmental responsibility fulfillment, and enriches the study of factors influencing corporate environmental investment behavior. It also provides important empirical evidence for central and local governments to implement green development and build a government–business collaborative environmental governance system.

Corporate environmental investment and sustainable development: based on the perspective of Marxist ecological civilization.

This paper uses the sample of all A-share listed companies in China's securities market except insurance and financial enterprises from 2009 to 2021 to construct a long panel data, and explores whether the environmental investment of enterprises will promote their long-term sustainable development in China's unique and superior institutional and cultural environment from the perspective of Marxist ecological civilization. On the basis of controlling measurement errors, omitted variables, and endogenous problems of mutual causality to ensure the robustness of the research results, and further distinguishing the heterogeneous effects of environmental investment and sustainable development of enterprises in different degrees of market-oriented environment, the empirical study shows that (1) there is a significant positive relationship between environmental investment and sustainable development of enterprises. That is to say, environmental investment can help enterprises obtain social capital, alleviate resource constraints, enhance their market performance, and thus help their sustainable development in the future; (2) environmental protection investment has a significant positive impact on the sustainable development of enterprises in the mature market environment, while in the relatively backward market environment, environmental protection investment has no significant role in promoting the sustainable development of enterprises. This paper enriches the literature on corporate environmental investment, makes a preliminary test of the implementation effect of sustainable development in China, and provides more detailed empirical evidence for the government to further guide the implementation and implementation of corporate environmental responsibility.

ESG Scores and Environmental Protection Investment: Evidence from Listed Companies in China

The ESG concept has increasingly permeated the day-to-day management and strategic choices of companies in recent years. Within industries, regions and company sizes, all organizations have been allocating more resources to improving ESG. How does ESG scores affect corporate environmental investment? Exploring this question allow us to better understand the activities of corporate environmental investment, also be aware of the effectiveness of government's environmental regulation and industry regulation. Based on a panel of 615 Chinese listed corporates from 2019-2021 from CSMAR, the paper found: (1) For EPI of A-share listed companies, the amount was generally sufficient from 2019 to 2021, which is incompatible with previous discoveries. (2) There is a statistically significant relationship between the score of ESG and the amount of EPI. (3) The additional effect of centralized shareholding on the positive relationship remains unclear after robustness test. The findings above not only broaden the research perspective of EPI and ESG, but also enrich academic research on environmental management.

Governmental subsidies, corporate environmental investments and firm performance: Evidence based on oil & petroleum industry

This paper examines the impact of different types of government subsidies on the financial performance of oil & petroleum corporations. We find that environment-friendly government subsidies enhance the investments in environmental protection of oil & petroleum corporations, comparing with non-environment-friendly subsidies. Furthermore, preventive investments in environmental protection significantly mediate the effect of corporate subsidies on financial performance, whereas government investments in environmental protection have a masking effect. Overall, we provide policy implications for government support to balance the development of firms and environmental protection.

Effect of Regional Cultural Diversity in Senior Executives on Environmental Protection Investment

With the increase in the seriousness of environmental issues and investors’ increasing concern for corporate environmental performance, more and more scholars are paying attention to the impact of executive diversification on corporate investment decisions. This study empirically examines the impact of regional cultural diversity in executive teams on corporate environmental investment and its moderating effect on different industries and regions, using companies listed in China from 2009 to 2019 as research samples, from the perspective of informal cultural systems. The research results indicate that: regional cultural diversity in executive teams can significantly promote corporate environmental investment; regional cultural diversity in executives is more conducive to increasing environmental investment in competitive industries, while the promotion effect of environmental protection investment in monopolistic industries is not significant; and diversity in regional culture in top management teams is more conducive to the promotion of environmental investment by coastal enterprises, while the promotion of environmental investment by non-coastal enterprises is not significant.

Source reduction strategy or end-of-pipe solution? The impact of green merger and acquisition on environmental investment strategy of Chinese heavily polluting enterprises

No consensus has been reached on whether green merger and acquisition (GMA) contributes to corporate green transition. Source reduction strategies are conducive to corporate green transition, while end-of-pipe solutions are not. Therefore, this paper studies the impact of GMA on corporate different environmental investment strategies using the data of Chinese heavily polluting enterprises from 2011 to 2020. It is found that GMA promotes corporate environmental investment. And enterprises are more likely to adopt source reduction strategies after GMA, which is mediated by bank loans and positively moderated by retail investor attention and information transparency. The above positive effect is only reflected in enterprises under low media pressure or high-intensity government regulation. Moreover, GMA can further enhance green innovation through source reduction strategies. This paper provides new evidence on whether and how GMA promotes corporate green transition from a new perspective.

Corporate Sustainability Development Strategy and Corporate Environmental Governance—The Moderating Role of Corporate Environmental Investments

Environmental degradation and ecological devastation have become widespread global concerns in recent years as a result of the expansion of the international economy. China's rapid economic development has been accompanied by a sloppy economic growth model that has damaged the local ecological environment. The Chinese government intends to improve the ecological environment by the end of 2020 in an effort to direct and improve these environmental issues. The strictest environmental laws became effective in 2015. In light of this, this research uses panel data analysis to examine the environmental strategy and environmental governance of Chinese corporations. This article analyses 14,512 samples of listed mainland Chinese enterprises from 2015 to 2020. This research investigates the connection between Corporate Sustainability Development Strategy and Corporate Environmental Governance, as well as the moderating effect of Corporate Environmental Investments.