Environmental justice, ethical transformation: Environmental courts and corporate ESG performance

Huan-yu Cui and Yue-qun Cao

Journal of Asian Economics, 2025, vol. 100, issue C

Abstract: This study leverages the staggered implementation of specialized environmental courts throughout China as an exogenous shock to explore their influence on firms’ ESG performance. Analyzing a dataset of Chinese publicly listed firms from 2009 to 2022, the results demonstrate that (1) these courts enhance firms’ ESG outcomes. The key conclusions remain consistent even after addressing potential endogeneity issues and mitigating TWFE bias. (2) Low managerial ownership ratios, high analyst attention, and environmental uncertainty drive the effect. (3) The primary channel is that environmental courts enhance environmental penalties, deterring local firms and leading to stronger environmental behavior and improved access to bank loans. (4) The effect is more pronounced in polluting, environmentally information-transparent, financially constrained firms, and cities with deliberative courts, strong public participation, and efficient financial environments. Overall, this study offers new perspectives to the legal and financial discourse, reinforcing the broader role of environmental justice in shaping ethical corporate behavior.

Keywords: ESG; Environmental court; Deterrent effect; Environmental behavior; Bank loan (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:asieco:v:100:y:2025:i:c:s1049007825001113

DOI: 10.1016/j.asieco.2025.101987

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