Can anti-corruption help realize the “strong” Porter Hypothesis in China? Evidence from Chinese manufacturing enterprises

Wenjian He, Xiaoyang Chen and Zhiyong John Liu

Journal of Asian Economics, 2022, vol. 80, issue C

Abstract: The existing research on the “strong” Porter Hypothesis has largely ignored the impact of the institutional environment. In this paper, we take the high-intensity anti-corruption campaign in China as a policy shock to explore the internal mechanism of anti-corruption as a moderator for the relationship between environmental regulations and enterprise financial performance, and investigate whether anti-corruption can help realize the “strong” Porter Hypothesis. Through empirical tests, we find that the environmental regulations implemented in China have significantly undermined the financial performance of manufacturing enterprises. However, by creating a fairer institutional environment, anti-corruption not only significantly improves the manufacturing enterprises’ financial performance, but also weakens the negative impact of environmental regulations. The above results still hold true upon a battery of robustness tests. Moreover, we further analyze the heterogeneous moderating effect of anti-corruption on different types of enterprises and find significant differences on the enterprises with different ownership natures or pollution levels. Therefore, we believe that the anti-corruption campaign is complimentary to the environmental policies in inhibiting rent-seeking activities and providing innovation incentives for enterprises facing environmental regulation, so as to realize the “strong” Porter Hypothesis and improve enterprise financial performance.

Keywords: Anti-corruption; Environmental regulations; Enterprise financial performance; The “strong” Porter Hypothesis (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:asieco:v:80:y:2022:i:c:s104900782200032x

DOI: 10.1016/j.asieco.2022.101473

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