Auditing leading officials: Unintended consequences of government audit reform on corporate green innovation
Hua Zhang and
Jie Lai
Economic Modelling, 2024, vol. 139, issue C
Abstract:
How does a major government audit reform targeting leading officials in China affect corporate green innovation (GI)? Existing studies inadequately examine the relationship between the end-of-tenure audit of natural resource assets (EANRA) and corporate GI performance. Employing a difference-in-difference-in-differences approach and utilizing data from Chinese industrial enterprises spanning 2008 to 2020, we identify that EANRA significantly hinders corporate GI, particularly for large enterprises, those operating in less competitive industries, and those located in the eastern and central regions. This effect is more pronounced in cities with newly appointed and outgoing leading officials, short-tenure mayors, and stricter environmental regulation intensity. The crowding-out effect occurs as EANRA inhibits corporate GI by reducing innovation inputs and imposing cost constraints. However, the EANRA effect can be mitigated by internal controls and media coverage. Our findings highlight the unintended consequences of government audit reform for GI in developing countries like China.
Keywords: End-of-tenure audit of natural resource assets; Green innovation; Environmental regulations; Difference-in-difference-in-differences; China (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:139:y:2024:i:c:s0264999324001779
DOI: 10.1016/j.econmod.2024.106820
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