Microeconomic effects of designating National Forest Cities: Evidence from China's publicly traded manufacturing companies

This study assesses the impact of designating National Forest Cities (NFCs), as an integrated environmental policy, on corporate business performance. To that end, we use propensity score matching and difference-in-differences models, coupled with data from China's manufacturing companies listed on Shanghai and Shenzhen Stock Exchanges over the period of 2000–2018. Our results show that the designation can significantly improve the business performance of manufacturing enterprises, but the effect takes a long time to shore up business performance—six years after the initial designation. This finding is robust across a series of tests. Furthermore, we show that the impact of NFC designation on corporate performance is reflected in improved labor productivity, capital allocation, innovation capacity, and management efficiency of the enterprises. These results not only validate the Porter Hypothesis conditionally but also provide a clear justification for policymakers and business managers of different countries to promote air quality and environmental improvement, including urban greening and forest/tree cover development.