How Environmental Regulation Affects Corporate ESG Performance: An Empirical Study Based on the Compliance Cost Hypothesis

Jingwen Lu ()
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Jingwen Lu: University of Bristol, Economics and Finance (BSc), Faculty of Social Sciences and Law

A chapter in Proceedings of the 2026 6th International Conference on Enterprise Management and Economic Development (ICEMED 2026), 2026, pp 63-69 from Springer

Abstract: Abstract As global environmental issues become increasingly severe, countries have introduced a series of environmental regulation policies to promote environmental protection. Using data from Chinese listed companies, this paper explores whether environmental regulation policies enhance corporate ESG performance. The empirical findings reveal that environmental regulation policies, instead, reduce corporate ESG performance. This is because environmental regulations increase corporate tax burdens and compliance costs, negatively impact corporate revenue and R&D investments. These findings align with the compliance cost hypothesis, which posits that environmental regulations increase production costs, reduce financial performance, and consequently hinder improvements in corporate environmental efficiency. Based on this, the paper recommends that environmental protection policies should be implemented gradually, without disrupting normal business operations and R&D decision-making, to sustainably achieve improvements in corporate environmental efficiency.

Keywords: environmental regulation; ESG; compliance costs (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6239-719-4_8

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DOI: 10.2991/978-94-6239-719-4_8

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