Environmental law enforcement and green innovation: evidence from the establishment of environmental courts in China

Xinyue Zhang and Yuxiang Zhong

Asia-Pacific Journal of Accounting & Economics, 2025, vol. 32, issue 5, 1006-1036

Abstract: Using the establishment of environmental courts in China as an exogenous shock to environmental enforcement, we find that environmental enforcement has a significantly positive effect on green innovation. Mechanism tests suggest that external pressures and internal incentives contribute to this positive effect. Cross-sectional analyses indicate that the effect is more pronounced for firms situated in regions with robust patent protection and those exhibiting superior corporate governance. Furthermore, companies that pursue green innovation demonstrate reduced greenhouse gas emissions, enhanced financial performance, and increased market value.

Date: 2025
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DOI: 10.1080/16081625.2025.2513911

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Asia-Pacific Journal of Accounting & Economics is currently edited by Yin-Wong Cheung, Hong Hwang, Jeong-Bon Kim, Shu-Hsing Li and Suresh Radhakrishnan

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