Government’s awareness of Environmental protection and corporate green innovation: A natural experiment from the new environmental protection law in China

Zhenming Fang, Xiaoran Kong, Ahmet Sensoy, Xin Cui and Feiyang Cheng

Economic Analysis and Policy, 2021, vol. 70, issue C, 294-312

Abstract: Based on the impact of the new environmental protection law promulgated by the Chinese government in 2015, we employ the difference-in-differences (DID) approach to investigate the impact of government environmental regulation on corporate green innovation. The evidence shows that government environmental regulation can significantly increase the number of green patents of heavily polluting industries. This result holds after a series of robustness tests. The analysis of the economic mechanism indicates that the new environmental protection law brings supervision pressure to heavily polluting firms, prompting them to improve the quality of information disclosure, thus improving green innovation. In addition, the regional economic development level, government subsidies, and public supervision can significantly affect the positive impact of the new environmental protection law. Meanwhile, the effect is more prominent in non-state-owned enterprises and in firms with small scale, low profitability, and weak internal governance.

Keywords: Environmental protection regulation; Green innovation; Information disclosure (search for similar items in EconPapers)
JEL-codes: G38 K32 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (84)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:70:y:2021:i:c:p:294-312

DOI: 10.1016/j.eap.2021.03.003

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