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Environmental centralization and corporate sustainable development: Evidence from China

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  • Zhu, Junpeng
  • Qu, Yan
  • Zhao, Xiaomeng

Abstract

This study regards the Vertical Environmental Management (the VEM reform) in China as a policy intervention, using a DID model to analyze its effect on corporate ESG performance. The results show that the VEM reform has substantially enhanced corporate ESG performance, particularly in the environmental component. The heterogeneity analysis demonstrates that the VEM reform significantly affects the ESG performance of enterprises in polluting industries, in cities with stringent environmental regulations or high political constraints. Mechanism analysis shows that, from a governmental perspective, the VEM reform has reinforced government commitment to environmental control and enhanced enforcement capabilities. At the enterprise level, the VEM reform has resulted in higher environmental expenditures and improved green total factor productivity. However, the study finds no compelling evidence supporting the Porter Hypothesis, indicating that the VEM reform does not stimulate green innovation among firms. This paper adds to the empirical literature on VEM reform by focusing on corporate ESG performance, providing important practical implications for environmental system reform and corporate sustainable development.

Suggested Citation

  • Zhu, Junpeng & Qu, Yan & Zhao, Xiaomeng, 2025. "Environmental centralization and corporate sustainable development: Evidence from China," Energy Economics, Elsevier, vol. 152(C).
    • Handle: RePEc:eee:eneeco:v:152:y:2025:i:c:s0140988325008266
    DOI: 10.1016/j.eneco.2025.108996
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