Regulatory greening: The impact of environmental legislation on corporate green innovation

Xiaoding Zhang, Yiran Niu, Deng-kui Si and Zumian Xiao

Economic Analysis and Policy, 2024, vol. 82, issue C, 359-376

Abstract: China's New Environmental Protection Law (NEPL) is an important adjustment in the face of the “new normal of economic development”. Leveraging the Difference-in-Difference (DID) method, we discern the multifaceted positive effects of the NEPL on both the qualitative and quantitative dimensions of green innovation. The mechanism analysis indicates that the enactment engenders heightened environmental awareness among senior management, increased cash holdings, and released financing constraints, leading to enhance the green innovations. Interestingly, a positive tone of management discussion and analysis (MD&A) can amplify the NEPL’s effect on green innovation scale, but its moderating effect on the quality development is not significant. Furthermore, the NEPL can more comprehensively and significantly enhance the green innovation activities in capital-intensive industries and large corporations.

Keywords: Environmental legislation; Corporate green innovation; Management green awareness; Tone of MD&A (search for similar items in EconPapers)
JEL-codes: D22 Q55 Q58 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:82:y:2024:i:c:p:359-376

DOI: 10.1016/j.eap.2024.03.012

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