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Strengthened enforcement, weakened efficiency: The effect of environmental inspection on corporate investment

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  • Wang, Jingqi
  • Zhang, Wei
  • Zou, Gaofeng
  • Li, Yi

Abstract

We examine the impact of China’s Central Environmental Protection Inspection on corporate investment efficiency. Results show a decline in investment efficiency of high-polluting firms, especially in non-state-owned and less politically connected firms, highlighting unforeseen negative effects of stricter environmental enforcement.

Suggested Citation

  • Wang, Jingqi & Zhang, Wei & Zou, Gaofeng & Li, Yi, 2023. "Strengthened enforcement, weakened efficiency: The effect of environmental inspection on corporate investment," Economics Letters, Elsevier, vol. 232(C).
    • Handle: RePEc:eee:ecolet:v:232:y:2023:i:c:s016517652300349x
    DOI: 10.1016/j.econlet.2023.111324
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    References listed on IDEAS

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    1. Wesley Blundell & Gautam Gowrisankaran & Ashley Langer, 2020. "Escalation of Scrutiny: The Gains from Dynamic Enforcement of Environmental Regulations," American Economic Review, American Economic Association, vol. 110(8), pages 2558-2585, August.
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    Cited by:

    1. Pan, Junyu & Du, Lizhao & Wu, Haitao & Liu, Xiaoqian, 2024. "Does environmental law enforcement supervision improve corporate carbon reduction performance? Evidence from environmental protection interview," Energy Economics, Elsevier, vol. 132(C).
    2. Zhang, Jintao & Su, Taoyong & Meng, Li, 2024. "Corporate earnings management strategy under environmental regulation: Evidence from China," International Review of Economics & Finance, Elsevier, vol. 90(C), pages 154-166.

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    More about this item

    Keywords

    Environmental regulatory enforcement; Investment efficiency; Over-investment;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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