Environmental Vertical Management and Enterprises’ Performance: Evidence from Water Pollution Reduction in China

Mengxue Ji, Zhenming Wu and Dandan Zhu ()
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Mengxue Ji: Regional Economy Research Institute, Sichuan Academy of Social Sciences, Chengdu 610072, China
Zhenming Wu: Institute of Regional and Urban Development, Sichuan Academy of Social Sciences, Chengdu 610072, China
Dandan Zhu: School of Economics, Sichuan Agricultural University, Chengdu 611130, China

Sustainability, 2023, vol. 15, issue 19, 1-17

Abstract: Firm-level evidence for the impact of environmental vertical management on enterprise environmental performance is limited, especially on the performance of water pollution reduction (WPR). Taking the environmental vertical management reform (EVMR) as a quasi-natural experiment, this study constructs a time-varying difference-in-differences model to investigate the effects of EVMR on the WPR performance of enterprises. Using the latest data from the China Industrial Enterprise Database and China Enterprise Pollution Emission Database (1998–2014), we find that EVMR promotes enterprises to improve the performance of WPR. Moreover, heterogeneity analysis shows that the effects vary with regions, industry pollution intensities, and sizes of enterprises. Further mechanism analysis indicates that EVMR reduces water pollution by stimulating production pattern transformation and decreasing fresh water consumption rather than by increasing wastewater treatment facilities. Our empirical findings support the rationality of EVMR in China and provide beneficial insights for enhancing environmental management systems in other developing economies.

Keywords: enterprise environmental performance; vertical management reform; water pollution; time-varying difference-in-differences; production pattern transformation (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2023
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