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Environmental information disclosure and firm production: evidence from the estimated efficiency of publicly listed firms in China

Yunguo Lu and Lin Zhang ()
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Yunguo Lu: Zhejiang Sci-Tech University
Lin Zhang: City University of Hong Kong

Journal of Productivity Analysis, 2023, vol. 59, issue 1, No 6, 99-119

Abstract: Abstract This study employs the recently developed conditional nonparametric frontier approach to assess the impact of environmental expenditures associated with environmental information disclosure (EID) on the production of China’s listed manufacturing firms from 2010 to 2018. An inverted U-shaped relationship is found between environmental expenditures and firms’ productive efficiency. Increasing expenditure on pollution control initially lowers the production efficiency at firm level, and indicates the negative impacts of regulatory costs attributable to the resources devoted to EID-related activities. However, a firm’s production efficiency increases with environmental expenditure after a certain threshold, which implies that the regulatory costs can be fully offset by triggering innovation. The co-existence of the traditional view of the negative impacts of environmental regulation on production and the positive impacts of Porter-type innovation explains the mixed empirical evidence in the literature. Government subsidies help firms to cover the regulatory costs and support a smooth transition to a Porter-type innovation regime. We also find that continuous environmental investments beyond the threshold can narrow the efficiency gap between firms in the same industry, bringing about additional societal spillover impacts. Our findings thus deepen the understanding on how regulations such as EID affect the economic performance of public firms.

Keywords: Environmental information disclosure; Efficiency; Nonparametric location-scale regression; Government subsidy; Porter hypothesis; D24; H23; Q58 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s11123-022-00655-y

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