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Regulatory greening: The impact of environmental legislation on corporate green innovation

Author

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  • Zhang, Xiaoding
  • Niu, Yiran
  • Si, Deng-kui
  • Xiao, Zumian

Abstract

China's New Environmental Protection Law (NEPL) is an important adjustment in the face of the “new normal of economic development”. Leveraging the Difference-in-Difference (DID) method, we discern the multifaceted positive effects of the NEPL on both the qualitative and quantitative dimensions of green innovation. The mechanism analysis indicates that the enactment engenders heightened environmental awareness among senior management, increased cash holdings, and released financing constraints, leading to enhance the green innovations. Interestingly, a positive tone of management discussion and analysis (MD&A) can amplify the NEPL’s effect on green innovation scale, but its moderating effect on the quality development is not significant. Furthermore, the NEPL can more comprehensively and significantly enhance the green innovation activities in capital-intensive industries and large corporations.

Suggested Citation

  • Zhang, Xiaoding & Niu, Yiran & Si, Deng-kui & Xiao, Zumian, 2024. "Regulatory greening: The impact of environmental legislation on corporate green innovation," Economic Analysis and Policy, Elsevier, vol. 82(C), pages 359-376.
    • Handle: RePEc:eee:ecanpo:v:82:y:2024:i:c:p:359-376
    DOI: 10.1016/j.eap.2024.03.012
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    More about this item

    Keywords

    Environmental legislation; Corporate green innovation; Management green awareness; Tone of MD&A;
    All these keywords.

    JEL classification:

    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

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