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How does digital environmental supervision affect corporate economic efficiency? Company-level evidence from China

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  • Du, Longzheng
  • Xiong, Ni
  • Hu, Yongheng

Abstract

What is the economic impact of digital environmental supervision on companies? Based on the quasi-natural experiment of digital environmental supervision represented by the establishment of automatic air monitoring stations (AAMSs), we adopt the time-varying difference-in-differences (DID) method to explore the impact of digital environmental supervision on the total factor productivity (TFP) of Chinese companies. The empirical findings show: (1) Digital environmental supervision reduces the TFP of listed companies by 4.17 %. The establishment of AAMSs increases corporate financing constraints, reduces cash flow, and raises operating costs, leading to a decline in corporate TFP. Government subsidies for environmental protection (GSEP) and corporate investment in environmental protection (CIEP) significantly alleviate the adverse impact of digital environmental supervision on corporate TFP. (2) Heterogeneity analysis reveals that digital environmental supervision significantly improves the TFP of foreign companies, while it significantly decreases the TFP of privately-owned companies and has no significant effect on state-owned enterprises. Regionally, digital environmental supervision reduces TFP in companies located in Central and Western China, while exerting no significant impact on those in Eastern China. Additionally, the decline in corporate TFP is more significant in non-key cities for environmental protection compared to key cities. These findings offer additional empirical evidence for understanding the relationship between digital environmental supervision and corporate TFP.

Suggested Citation

  • Du, Longzheng & Xiong, Ni & Hu, Yongheng, 2025. "How does digital environmental supervision affect corporate economic efficiency? Company-level evidence from China," Journal of Asian Economics, Elsevier, vol. 101(C).
    • Handle: RePEc:eee:asieco:v:101:y:2025:i:c:s1049007825002003
    DOI: 10.1016/j.asieco.2025.102076
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