Environmental Regulation, regional finance development and enterprises' cross-regional capital flow

Hong Yu, Qi Lyu and Yi Jiang

International Review of Economics & Finance, 2025, vol. 99, issue C

Abstract: This paper analyzes both theoretically and practically the effects of environmental regulation on cross-regional capital flows. Specifically, this paper selects the New Environmental Protection Law as a natural experiment to examine the causal relationship between environmental regulation and enterprises' cross-regional capital flows spanning 2011 to 2022. The findings indicate that introducing the new Environmental Protection Law can inhibit enterprises' cross-regional capital flow by reducing regional finance development. Further analysis indicates that firms' nature and regional legal environment have heterogeneous effects. Specifically, state-owned enterprises are insensitive to environmental regulation, while non-state-owner enterprises have opposite ones due to severe supervision. An excellent legal environment plays a vital role in inhibiting effects.

Keywords: Environmental regulation; Finance development; Cross-regional capital flow (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:99:y:2025:i:c:s1059056025001479

DOI: 10.1016/j.iref.2025.103984

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