How do environmental subsidies affect the environmental performance of heavily polluting enterprises: evidence from China

Feimei Liao, Yaoyao Hu and Shulin Xu

Economic Research-Ekonomska Istraživanja, 2023, vol. 36, issue 3, 2160777

Abstract: We investigate the influence of environmental subsidies on enterprise environmental performance based on 257 heavily polluting A-share listed companies in Shanghai and Shenzhen stock exchange from 2010 to 2017. We also discuss the mechanism of how these environmental subsidies influence enterprise environmental performance further. The study employs OLS and PSM methods to evaluate the association between environmental subsidies and enterprise environmental performance. The study finds that environmental subsidies have a positive incentive effect on the environmental performance of heavily polluting enterprises. Its positive incentive effect mainly contributes through three channels: promoting green technology innovation, increasing government environmental supervision and enhancing executives’ environmental awareness. Further research shows that environmental subsidies significantly promote environmental performance in non-state-owned enterprises, with a high degree of financing constraints and high levels of risk-taking. This study contributes to prior works by revealing the black box of the government’s macro policies affecting enterprise micro behaviour and exploring how environmental subsidies influence firm-specific behaviours.

Date: 2023
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DOI: 10.1080/1331677X.2022.2160777

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