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Tightening of environmental regulations and corporate environmental irresponsibility: a quasi-natural experiment

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Abstract

The impact of environmental regulation on corporate environmental responsibility (CER) has been a concern among academicians and practitioners. However, the relationship between environmental regulation and corporate environmental irresponsibility (CEIR) has rarely been reported. Using the difference-in-differences (DID) method, this study empirically examines the effect of China’s new Environmental Protection Law (NEPL) on CEIR. Empirical results indicate the following: (1) The NEPL has enhanced the intensity of environmental regulation and significantly inhibited the environmentally irresponsible behaviors of heavy-polluting enterprises. After several robustness tests and endogenous control, the aforementioned inhibitory effect is still present; (2) the inhibitory effect of the NEPL on CEIR is more apparent in state-owned enterprises, low-marketization areas, and industries with high pollution intensity; (3) the mechanism test shows that the NEPL restrains CEIR by encouraging heavy-polluting enterprises to increase their environmental investment. Providing unique evidence in the eastern cultural context, this study not only expands the research perspective of avoiding CEIR from the point of view of environmental regulation but also enriches the research literature on the emerging policy and business management.

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Notes

  1. See the first WBCSD social responsibility dialogue held in the Netherlands in 1998.

  2. We select the B, C, and D industries as research samples for the following reasons. First, heavily polluting industries with higher emission intensity will be more sensitive to the NEPL's stringent environmental regulations. Exploring the impact of the NEPL on a heavily polluting industry is conducive to more accurately identifying any new effects of the NEPL. Therefore, this article chooses heavily polluting industries as the experimental group. The heavily polluting industries are all distributed under the B, C, and D first-level industry categories. Because the DID method requires that the samples in the treatment group and control group are homogenous prior to policy implementation (i.e., the two groups should have the same development trend of environmental responsibility before the implementation of the policy), we follow the literature (Chen & Zeng, 2018) and use the simple matching rules. The listed companies in the same category as the heavily polluting enterprises are regarded as non-heavily polluting enterprises and are considered the control group.

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Funding

This research was supported by the Youth Project for National Nature Science Foundation of China (Grant No. 71904208), the Major Project for National Natural Science Foundation of China (Grant No. 71991483), the Youth Project for Nature Science Foundation of Hunan Province (Grant No. 2021JJ40796), and the Project of Social Science Achievement Evaluation Committee of Hunan Province (Grant No. XSP21YBZ168).

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Authors and Affiliations

  1. Business School, Central South University, NO.932 Lushan South Road, Yuelu District, Changsha, 410083, Hunan, China

    Huixiang Zeng, Xinxin Zhang, Qiong Zhou & Youliang Jin

  2. Graduate School of International Social Sciences, YOKOHAMA National University, NO.79-4 Tokiwadai, Hodogaya, Yokohama, 240-8501, Japan

    Jin Cao

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  1. Huixiang Zeng
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Contributions

HZ contributed to the conception of the study; XZ performed the data analyses and wrote the manuscript; QZ helped perform the analysis with constructive discussions; YJ contributed significantly to analysis and manuscript preparation; JC helped perform the analysis with constructive discussions.

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Correspondence to Youliang Jin.

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Appendix

Appendix

Table A1 CEIR measurement standards
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Zeng, H., Zhang, X., Zhou, Q. et al. Tightening of environmental regulations and corporate environmental irresponsibility: a quasi-natural experiment. Environ Dev Sustain 24, 13218–13259 (2022). https://doi.org/10.1007/s10668-021-01988-8

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