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Do Fiscal Environmental Protection Expenditures Crowd Out Corporate Environmental Protection Investments?

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  • Yaoxiaoxue Hong

    (School of International Trade and Economics, University of International Business and Economics, Beijing 100029, China)

  • Xianling Jiang

    (School of International Trade and Economics, University of International Business and Economics, Beijing 100029, China)

  • Beibei Shi

    (School of International Trade and Economics, University of International Business and Economics, Beijing 100029, China)

  • Chang Yu

    (School of Economics and Management, Beijing Forestry University, Beijing 100083, China)

Abstract

This research investigates how fiscal environmental expenditures impact corporate environmental investments and whether corporations act as free-riders. Using a sample of 1688 firm-year observations from 2008 to 2019 in the Chinese context, we observe that fiscal environmental expenditures have a significantly negative “crowding-out” effect on corporate green investments, which is mediated by the disclosure of pollution emissions. Additionally, a heterogeneity analysis reveals that this negative impact is more pronounced for non-heavily polluted and state-owned corporations and corporations located in three major agglomerations. This finding remains robust when employing an instrumental variable approach to address potential endogeneity. Our study contributes to the current literature by providing new insights regarding government environmental protection behaviors’ impacts on corporate green behaviors. The study also provides insights for policymakers to focus more on light-polluting corporations and state-owned corporations, because they have more chances to avoid environmental responsibilities.

Suggested Citation

  • Yaoxiaoxue Hong & Xianling Jiang & Beibei Shi & Chang Yu, 2022. "Do Fiscal Environmental Protection Expenditures Crowd Out Corporate Environmental Protection Investments?," Sustainability, MDPI, vol. 14(20), pages 1-23, October.
    • Handle: RePEc:gam:jsusta:v:14:y:2022:i:20:p:13608-:d:948782
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