 Can government environmental audit improve green innovation?Jianhua Tan, Xinyue Zhou, Min Hua and Kam C. Chan International Review of Financial Analysis, 2025, vol. 104, issue PA Abstract: We explore how the implementation of a government environmental audit (GEA) affects corporate green innovations. A GEA is a government audit program that targets environmental issues in a country. Using the 2009 GEA of China as an exogenous event and a sample of Chinese firms from 2001 to 2020, we use a difference-in-differences research design to conduct our analysis. The results indicate more green innovation outcomes in heavy-polluting firms than in non-heavy-polluting firms after the GEA's implementation. We find that corporate environmental investments and the environmental penalty are transmission channels for the impact of GEA on green innovations. Additional analyses suggest that the effects are stronger for firms in regions governed by officials with strong career incentives, located in regions with a low level of marketization, facing a low financial constraint, or belonging to a highly competitive industry. Most importantly, we show that implementing GEA can improve firms' market returns and value. Keywords: Government environmental audit; Green innovation; Economic consequence (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:104:y:2025:i:pa:s1057521925004211 DOI: 10.1016/j.irfa.2025.104334 Access Statistics for this article International Review of Financial Analysis is currently edited by B.M. Lucey More articles in International Review of Financial Analysis from Elsevier |
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