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Environmental regulatory system reform and corporate ESG ratings: Evidence from China

Author

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  • Chen, Qi
  • Li, Menghan

Abstract

As China continues to deepen its reforms, it remains to be explored the potential impact of environmental regulatory system reform on corporate concept of sustainable business. Although existing literature has explored factors influencing corporate ESG ratings, little attention has been paid to the impact of environmental regulatory system reform. Based on the data of Chinese A-share listed firms from 2012 to 2021, we examine the impact of CEPI on corporate ESG ratings by using a multi-period difference-in-differences model. The findings suggest that CEPI significantly enhances corporate ESG ratings. The main channel is through increasing corporate environmental investment. The promotional effect of CEPI on corporate ESG ratings is particularly pronounced in companies with high industry competition, high media attention, and those prone to “government-enterprise collusion.” These findings contribute to understanding the micro-level effects of environmental regulatory system reforms and provide valuable insights for other developing countries to improve corporate ESG ratings.

Suggested Citation

  • Chen, Qi & Li, Menghan, 2024. "Environmental regulatory system reform and corporate ESG ratings: Evidence from China," Economic Modelling, Elsevier, vol. 135(C).
    • Handle: RePEc:eee:ecmode:v:135:y:2024:i:c:s026499932400066x
    DOI: 10.1016/j.econmod.2024.106710
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    Keywords

    Environmental regulatory system reform; ESG ratings; Multi-period DID;
    All these keywords.

    JEL classification:

    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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