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Non-mandatory approaches to corporate environmental engagement: Insights from the Belt and Road Initiative

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  • Chen, Yinghui
  • Tong, Ying
  • Zhou, Can

Abstract

We investigate the impact of the Belt and the Road Initiative (BRI) proposal on environmental investments made by listed firms within China's heavy-polluting industry. Using a difference-in-differences approach, we find that the BRI proposal results in a 81.53% increase in environmental investment made by firms located in provinces along the BRI route. Mechanism analyses suggest that government subsidies for firms' environmental protection activities alleviate corporate financial constraints, thereby providing them with the financial capacity for environmental protection. We further show heterogeneous effects across ownerships and the severity of agency issues. Overall, the results suggest that a combination of non-mandatory measures and financial incentives can effectively promote corporate engagement in environmental protection efforts.

Suggested Citation

  • Chen, Yinghui & Tong, Ying & Zhou, Can, 2024. "Non-mandatory approaches to corporate environmental engagement: Insights from the Belt and Road Initiative," International Review of Economics & Finance, Elsevier, vol. 92(C), pages 1287-1301.
    • Handle: RePEc:eee:reveco:v:92:y:2024:i:c:p:1287-1301
    DOI: 10.1016/j.iref.2024.02.003
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