Reformation of government officials’ performance evaluation and corporate environmental investment: The moderating effect of corporate bargaining power

Qiang Li, Zichun He, Wenjuan Ruan, Yulei Xia and Qingting Cai

Economic Analysis and Policy, 2025, vol. 85, issue C, 150-168

Abstract: With increasing deterioration of the environment and growing global environmental awareness, there is a need to reform the performance evaluation of government officials from focusing solely on economic growth to incorporating environmental protection indicators. We use the pilot scheme of China's natural resource accountability audit (NRAA) as a natural experiment. Using data for 2010–2022 from Chinese listed companies in heavily polluting industries, we apply a difference-in-differences (DID) model to test the impact of the NRAA policy on corporate environmental investment (CEI) and further examine the moderating role of corporate bargaining power. The empirical results demonstrate that the level of CEI in pilot cities is significantly higher than that in non-pilot cities. However, if firms possess stronger bargaining power, the positive effect of the policy on CEI diminishes. Further analysis reveals that the influence of corporate bargaining power on the effectiveness of the policy can be constrained within the context of better internal and external governance. China's experience provides a viable approach for integrating environmental governance into a more comprehensive framework of performance evaluation systems for government officials.

Keywords: Environmental investment; Natural resource accountability audit; Corporate bargaining power; Environmental regulation (search for similar items in EconPapers)
JEL-codes: D22 Q28 Q56 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:85:y:2025:i:c:p:150-168

DOI: 10.1016/j.eap.2024.11.019

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