Green securities policy and the environmental performance of firms: Assessing the impact of China's pre-IPO environmental inspection policy

Shanshan Wu, Jing Zhang and Robert Elliott ()

Ecological Economics, 2023, vol. 209, issue C

Abstract: China has experimented with a wide range of policies to encourage firms to improve their environmental performance, often with mixed results. This paper investigates the effectiveness of combining two different policies at the same time: (1) a more centralised environmental inspection process and (2) new rules on the public disclosure of policy compliance for firms wanting to undertake an initial public offering (IPO). A theoretical framework predicts that a more centralised inspection and public disclosure should improve both a firm's environmental performance and profitability. The results of instrumental variable estimations for 536 listed Chinese firms for the period 2009 to 2019 confirm the theoretical predictions although the positive effect on profitability only lasts for two years after compliance with the IPO requirements. An investigation into possible mechanisms shows that the joint policy promotes investment in green projects while also increasing demand for the firm's products. The findings highlight greater regulatory complexity may be needed if a country wishes to change the behaviour of firms in a manner that is consistent with overcoming environmental challenges.

Keywords: Environmental regulations; Centralisation; Firm performance; Public disclosure; China (search for similar items in EconPapers)
JEL-codes: D82 Q53 Q58 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolec:v:209:y:2023:i:c:s092180092300099x

DOI: 10.1016/j.ecolecon.2023.107836

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