The dark side of environmental judicial specialization: Corporate labor income share in China

Although prior research has largely emphasized the benefits of environmental judicial specialization, its potential adverse effects remain understudied. Using a multiperiod difference-in-differences design within the quasi-experimental setting of China's environmental court establishment (ECE), this study examines how ECE influences corporate labor income share (CLIS). The findings show that ECE significantly reduces CLIS. Decomposition analysis indicates that although ECE raises labor productivity, it does not generate corresponding increases in employee compensation, thereby suppressing CLIS. Mechanism analysis shows that ECE promotes investment structure optimization and technological innovation but simultaneously encourages capital-biased income allocation that further reduces CLIS. Cross-sectional evidence reveals that the negative effect is stronger in regions with weaker wage bargaining power; in capital-intensive, highly competitive, and heavily polluting industries; and among privately owned firms and those with poorer social responsibility performance. Governance mechanism analysis demonstrates that the employee director system and employee stock ownership plan can mitigate this adverse influence. Overall, the study uncovers overlooked distributional consequences of environmental judicial specialization and identifies effective compensatory governance mechanisms.