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Environmental regulation and green innovation: Evidence from heavily polluting firms in China

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  • Guo, Mengmeng
  • Wang, Huixin
  • Kuai, Yicheng

Abstract

This study examines the effect of environmental regulation on firms’ green innovation, as well as the heterogeneous effects among different firms. Using the sample of A-share listed firms in the heavy-polluting industry in China and the manually collected government-implemented environmental regulation from 2006 to 2018, we find strong evidence that environmental regulation has a significantly positive effect on firms’ green innovation. Further, our results show that environmental regulation has a more prominent effect on firms with poorer internal and external governance. In addition to promoting firm green innovation, environmental policies can benefit firms’ long-term development as well.

Suggested Citation

  • Guo, Mengmeng & Wang, Huixin & Kuai, Yicheng, 2023. "Environmental regulation and green innovation: Evidence from heavily polluting firms in China," Finance Research Letters, Elsevier, vol. 53(C).
    • Handle: RePEc:eee:finlet:v:53:y:2023:i:c:s1544612322008005
    DOI: 10.1016/j.frl.2022.103624
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    Cited by:

    1. Yanchao Feng & Rongbing Huang & Yidong Chen & Guoshuo Sui, 2024. "Assessing the moderating effect of environmental regulation on the process of media reports affecting enterprise investment inefficiency in China," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-16, December.
    2. Jiamin Liu & Xiaoyu Ma & Bin Zhao & Qi Cui & Sisi Zhang & Jiaoning Zhang, 2023. "Mandatory Environmental Regulation, Enterprise Labor Demand and Green Innovation Transformation: A Quasi-Experiment from China’s New Environmental Protection Law," Sustainability, MDPI, vol. 15(14), pages 1-31, July.
    3. Zihao Wu & Ye Wang, 2023. "Does Heterogeneous Environmental Regulation Induce Regional Green Economic Growth? Evidence from China," Sustainability, MDPI, vol. 15(12), pages 1-14, June.
    4. Zheng, Lei, 2023. "Heterogeneous impacts of financial inclusion on enterprise innovation: Evidence from China," Finance Research Letters, Elsevier, vol. 55(PB).

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    More about this item

    Keywords

    Environmental regulation; Green innovation; Internal governance; External governance;
    All these keywords.

    JEL classification:

    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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