Environmental Judicial Reform and Corporate Sustainable Development: A Quasi-Natural Experiment in China

This study investigates the impact of environmental judicial reform on corporate sustainable development, specifically focusing on the establishment of Environmental Protection Courts (EPCs) in China. Leveraging a quasi-natural experiment created by the staggered rollout of EPCs, we employ a difference-in-differences (DID) model based on a comprehensive dataset of Chinese A-share listed companies from 2009 to 2024. The empirical results demonstrate that the establishment of EPCs significantly enhances corporate ESG performance. This promoting effect remains robust across a series of validity tests, including alternative ESG measures and green patent indicators. Mechanism analysis reveals a dual channel: externally, the reform intensifies local governmental supervision and penalty risks; internally, it elevates managerial green cognition and fosters substantive green investment. Heterogeneity analysis further indicates that the effect is more pronounced in regions with stronger judicial foundations and, notably, for non-heavy-polluting firms sensitive to reputational risks. This paper contributes to the literature by unpacking the “black box” of the judicial transmission mechanism and providing causal evidence of how specialized environmental justice shapes corporate sustainability strategies.