The motivation and impact of polluting Enterprises' diversifications: Quasi-natural experiments from environmental protection interview

Xing Sun, Minzhen Lin and Huaming Zhong

Energy Economics, 2024, vol. 129, issue C

Abstract: In the background of China's central government's intensive efforts to prevent and control pollution, a deep understanding of the enterprises' short-term strategic behavior is essential to the implementation of environmental policies. This paper identifies the impact of Environmental Protection Interview (EPI) on the diversification of polluting enterprises using a difference-in-differences method with a sample of listed companies in A-share market from 2010 to 2020. The study finds that: First, EPI significantly contribute to the diversification of polluting enterprises in the interviewed areas. Second, sewage charges increase the cost of compliance with environmental regulations and push back diversified behaviors of polluting enterprises, while environmental subsidies help enterprises to identify the pathways to cleaner production and weaken the level of diversification of polluting enterprises. Finally, the inherent motivation for the diversified practices of the polluters in the interviewed areas is not to alleviate the financing constraints of the enterprises but is the benefit encroachment by major shareholders and the self-interest pursuit of high remuneration by the senior managers, and it ultimately leads to a decrease in the value of polluting enterprises and the scale of environmental protection investment. This paper not only extends the study on the short-term strategic behavior of firms in response to environmental regulation but also provides important empirical evidence to understand the drivers and consequences of corporate diversification.

Keywords: Diversification; Environmental protection interview; Difference-in-differences (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0140988323007016
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:129:y:2024:i:c:s0140988323007016

DOI: 10.1016/j.eneco.2023.107203

Access Statistics for this article

Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

More articles in Energy Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().