Environmental policy stringency and firm efficiency in developing countries

Bao We Wal Bambe (), Jean-Louis Combes (), Ben-Vieira Kouassi and Sonia Schwartz ()
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Bao We Wal Bambe: LEO - Laboratoire d'Économie d'Orleans [2022-...] - UO - Université d'Orléans - UT - Université de Tours - UCA - Université Clermont Auvergne
Jean-Louis Combes: LEO - Laboratoire d'Économie d'Orleans [2022-...] - UO - Université d'Orléans - UT - Université de Tours - UCA - Université Clermont Auvergne
Ben-Vieira Kouassi: UCA - Université Clermont Auvergne, UO - Université d'Orléans
Sonia Schwartz: LEO - Laboratoire d'Économie d'Orleans [2022-...] - UO - Université d'Orléans - UT - Université de Tours - UCA - Université Clermont Auvergne

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Abstract: This article examines the impact of environmental stringency on firm efficiency, using a large cross-country dataset of 68 developing countries from 2006–2020. We combine the newly published Environmental Performance Index (EPI) as an indicator of the stringency of environmental regulations with firm data from the World Bank Enterprise Surveys (WBES). Our results indicate that stricter environmental policies significantly increase firm efficiency, and the effect is robust. Moreover, we find that the intensity of environmental stringency matters, and that firm size, firm pollution intensity, and institutional quality also influence the relationship between environmental stringency and efficiency. Thus, our results support the Porter hypothesis in the case of developing countries.

Date: 2025-11-22
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Published in Small Business Economics, 2025, ⟨10.1007/s11187-025-01128-w⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05397470

DOI: 10.1007/s11187-025-01128-w

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