Business environment optimization effects on enterprise environmental protection investment

Xiaofang Guo, Sicen Chen and Chenlan Liu

Finance Research Letters, 2025, vol. 71, issue C

Abstract: The business environment is essential for enterprise survival and development. A favorable business environment promotes high-quality enterprise development; however, research on its impact and mechanism regarding corporate environmental protection investment is lacking. This study examined China's Shanghai and Shenzhen A–share listed companies from 2010 to 2020 to explore the relation between the business environment and corporate environmental protection investment. We found that a positive business environment contributes to increased corporate environmental protection investment, alleviating financing constraints and promoting digital transformation as essential mechanisms. Heterogeneity analysis demonstrates that this promotion effect was more pronounced among nonstate-owned enterprises and nonheavy-polluting industry firms. This study augments the literature concerning business environments and firms’ environmental protection investment by elucidating their impact mechanism and providing a reference for government departments in optimizing business environments.

Keywords: Business environment; Environmental protection investment; Financing constraints; Digital transformation (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:71:y:2025:i:c:s1544612324014521

DOI: 10.1016/j.frl.2024.106423

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