The Impact of the New Environmental Protection Law on the Leverage Manipulation Behavior of Heavy Polluters

Jiangyi Guo ()
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Jiangyi Guo: China Agricultural University, Department of Agricultural and Forestry Economics and Management, College of Economics and Management

A chapter in Proceedings of the 9th International Conference on Financial Innovation and Economic Development (ICFIED 2024), 2024, pp 575-589 from Springer

Abstract: Abstract The new Environmental Protection Law effectively improves China's environmental governance level but also increases enterprises’ sewage costs and operating expenses, which may increase the incentives for leveraged manipulation behavior. This paper explores the impact of the introduction of the new Environmental Protection Law on the leverage manipulation behavior of heavily polluting enterprises by using the double difference model (DID) with the data of China's A-share non-financial listed companies from 2010 to 2021. It is found that the introduction of the new Environmental Protection Law has significantly exacerbated the leverage manipulation behavior of heavy polluters. At the same time, the introduction of the new Environmental Protection Law has a stronger exacerbating effect on the leverage manipulation behavior of heavy polluters in the presence of increased regulatory uncertainty. Heterogeneity analysis shows that the introduction of the new Environmental Protection Law will further exacerbate corporate leverage manipulation under the condition that executives do not have political affiliation and the green background; tax incentives can alleviate the exacerbating effect of the new Environmental Protection Law on corporate leverage manipulation, while the new Environmental Protection Law significantly exacerbates the leverage manipulation of corporations under the condition of more government subsidies. Finally, based on the above findings, this paper puts forward policy recommendations for the relevant departments to formulate policies and regulate the leverage manipulation behavior of heavily polluting enterprises.

Keywords: new EPA; heavy polluters; leverage manipulation behavior; regulatory uncertainty (search for similar items in EconPapers)
Date: 2024
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DOI: 10.2991/978-94-6463-408-2_65

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