IDEAS home Printed from https://ideas.repec.org/a/gam/jijerp/v20y2022i1p447-d1016778.html
   My bibliography  Save this article

Government Environmental Regulation and Corporate ESG Performance: Evidence from Natural Resource Accountability Audits in China

Author

Listed:
  • Yingzheng Yan

    (College of Economics and Management, Fujian Agriculture and Forestry University, Fuzhou 350002, China)

  • Qiuwang Cheng

    (School of Economics and Business Administration, Postdoctoral Research Center of Business Administration, Chongqing University, Chongqing 400044, China)

  • Menglan Huang

    (College of Economics and Management, Fujian Agriculture and Forestry University, Fuzhou 350002, China)

  • Qiaohua Lin

    (College of Economics and Management, Fujian Agriculture and Forestry University, Fuzhou 350002, China)

  • Wenhe Lin

    (College of Economics and Management, Fujian Agriculture and Forestry University, Fuzhou 350002, China)

Abstract

With the increasing global concern for the ecological environment and sustainable development, all countries have proposed environmental regulatory policies to improve the quality of their ecological environments. China has also proposed an environmental regulation policy: Leading an officials’ accountability audit of natural resources (AANR). As the main subject of consuming resources, the sustainability of enterprises has become a focus of all parties. The Environmental, Social, and Governance (ESG) metric measures corporate sustainability. As a result, companies’ ESG performance has gained the community’s attention. Based on data from Chinese A-share listed companies in Shanghai and Shenzhen from 2011 to 2019, this study investigates the role of AANR on the ESG performance of companies via the difference-in-differences (DID) method. This study found that implementing the AANR pilot significantly negatively impacted corporate ESG performance. This result was found to remain robust after passing parallel trend and robustness tests. Further research found that the AANR differed significantly across corporate ownership and regions in corporate ESG performance. First, pilot implementation had a more significant impact on the ESG performance of non-state enterprises. Second, the differences across regions showed that the central region had the most significant impact, followed by the western region, while the eastern region had the most negligible impact. This study will help government departments improve the AANR system and enable companies to focus on their ESG performance.

Suggested Citation

  • Yingzheng Yan & Qiuwang Cheng & Menglan Huang & Qiaohua Lin & Wenhe Lin, 2022. "Government Environmental Regulation and Corporate ESG Performance: Evidence from Natural Resource Accountability Audits in China," IJERPH, MDPI, vol. 20(1), pages 1-16, December.
    • Handle: RePEc:gam:jijerp:v:20:y:2022:i:1:p:447-:d:1016778
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/1660-4601/20/1/447/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/1660-4601/20/1/447/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. repec:eme:maj000:maj-08-2019-2378 is not listed on IDEAS
    2. Michael L. Lemmon & Karl V. Lins, 2003. "Ownership Structure, Corporate Governance, and Firm Value: Evidence from the East Asian Financial Crisis," Journal of Finance, American Finance Association, vol. 58(4), pages 1445-1468, August.
    3. Yi Huang & Marco Pagano & Ugo Panizza, 2020. "Local Crowding‐Out in China," Journal of Finance, American Finance Association, vol. 75(6), pages 2855-2898, December.
    4. Gunther Capelle-Blancard & Aurélien Petit, 2019. "Every Little Helps? ESG News and Stock Market Reaction," Journal of Business Ethics, Springer, vol. 157(2), pages 543-565, June.
    5. Zhao, Shu Liang & Song, Wei & Zhu, Dong Yun & Peng, Xiao Bao & Cai, Wenjing, 2013. "Evaluating China's regional collaboration innovation capability from the innovation actors perspective—An AHP and cluster analytical approach," Technology in Society, Elsevier, vol. 35(3), pages 182-190.
    6. Bolton, Patrick & Kacperczyk, Marcin, 2021. "Do investors care about carbon risk?," Journal of Financial Economics, Elsevier, vol. 142(2), pages 517-549.
    7. Thorsten Beck & Ross Levine & Alexey Levkov, 2010. "Big Bad Banks? The Winners and Losers from Bank Deregulation in the United States," Journal of Finance, American Finance Association, vol. 65(5), pages 1637-1667, October.
    8. Lin, Yongjia & Fu, Xiaoqing & Fu, Xiaolan, 2021. "Varieties in state capitalism and corporate innovation: Evidence from an emerging economy," Journal of Corporate Finance, Elsevier, vol. 67(C).
    9. Samuel Drempetic & Christian Klein & Bernhard Zwergel, 2020. "The Influence of Firm Size on the ESG Score: Corporate Sustainability Ratings Under Review," Journal of Business Ethics, Springer, vol. 167(2), pages 333-360, November.
    10. Remmer Sassen & Anne-Kathrin Hinze & Inga Hardeck, 2016. "Impact of ESG factors on firm risk in Europe," Journal of Business Economics, Springer, vol. 86(8), pages 867-904, November.
    11. Patrick Button, 2018. "Expanding Employment Discrimination Protections for Individuals with Disabilities: Evidence from California," ILR Review, Cornell University, ILR School, vol. 71(2), pages 365-393, March.
    12. Székely, Francisco & Knirsch, Marianna, 2005. "Responsible Leadership and Corporate Social Responsibility:: Metrics for Sustainable Performance," European Management Journal, Elsevier, vol. 23(6), pages 628-647, December.
    13. Xiting Wu & Qun CAO & Xiaoping Tan & Liang Li, 2020. "The effect of audit of outgoing leading officials’ natural resource accountability on environmental governance: evidence from China," Managerial Auditing Journal, Emerald Group Publishing Limited, vol. 35(9), pages 1213-1241, November.
    14. Ying Jiang & Xiaolong Xue & Weirui Xue, 2018. "Proactive Corporate Environmental Responsibility and Financial Performance: Evidence from Chinese Energy Enterprises," Sustainability, MDPI, vol. 10(4), pages 1-13, March.
    15. Yuming Zhang & Juanjuan Zhang & Zhang Cheng, 2021. "Stock Market Liberalization and Corporate Green Innovation: Evidence from China," IJERPH, MDPI, vol. 18(7), pages 1-22, March.
    16. Huixiang Zeng & Xuemei Li & Qiong Zhou & Lin Wang, 2022. "Local government environmental regulatory pressures and corporate environmental strategies: Evidence from natural resource accountability audits in China," Business Strategy and the Environment, Wiley Blackwell, vol. 31(7), pages 3060-3082, November.
    17. Gillan, Stuart L. & Koch, Andrew & Starks, Laura T., 2021. "Firms and social responsibility: A review of ESG and CSR research in corporate finance," Journal of Corporate Finance, Elsevier, vol. 66(C).
    18. Magali A. Delmas & Sanja Pekovic, 2018. "Corporate Sustainable Innovation and Employee Behavior," Journal of Business Ethics, Springer, vol. 150(4), pages 1071-1088, July.
    19. Bruna, Maria Giuseppina & Loprevite, Salvatore & Raucci, Domenico & Ricca, Bruno & Rupo, Daniela, 2022. "Investigating the marginal impact of ESG results on corporate financial performance," Finance Research Letters, Elsevier, vol. 47(PA).
    20. Li Wang & Dongmin Kong & Jian Zhang, 2021. "Does the Political Promotion of Local Officials Impede Corporate Innovation?," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 57(4), pages 1159-1181, March.
    21. Amal Aouadi & Sylvain Marsat, 2018. "Do ESG Controversies Matter for Firm Value? Evidence from International Data," Post-Print halshs-02007374, HAL.
    22. Albertina Paula Monteiro & Isabel-María García-Sánchez & Beatriz Aibar-Guzmán, 2022. "Labour Practice, Decent Work and Human Rights Performance and Reporting: The Impact of Women Managers," Journal of Business Ethics, Springer, vol. 180(2), pages 523-542, October.
    23. Amal Aouadi & Sylvain Marsat, 2018. "Do ESG Controversies Matter for Firm Value? Evidence from International Data," Journal of Business Ethics, Springer, vol. 151(4), pages 1027-1047, September.
    24. Yaghoub Abdi & Xiaoni Li & Xavier Càmara-Turull, 2022. "Exploring the impact of sustainability (ESG) disclosure on firm value and financial performance (FP) in airline industry: the moderating role of size and age," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 24(4), pages 5052-5079, April.
    25. Feng, Jingwen & Goodell, John W. & Shen, Dehua, 2022. "ESG rating and stock price crash risk: Evidence from China," Finance Research Letters, Elsevier, vol. 46(PB).
    26. Bhandari, Avishek & Javakhadze, David, 2017. "Corporate social responsibility and capital allocation efficiency," Journal of Corporate Finance, Elsevier, vol. 43(C), pages 354-377.
    27. Jiang, Zhenyu & Wang, Zongjun & Lan, Xiao, 2021. "How environmental regulations affect corporate innovation? The coupling mechanism of mandatory rules and voluntary management," Technology in Society, Elsevier, vol. 65(C).
    28. Gonenc, Halit & Scholtens, Bert, 2017. "Environmental and Financial Performance of Fossil Fuel Firms: A Closer Inspection of their Interaction," Ecological Economics, Elsevier, vol. 132(C), pages 307-328.
    29. Hayam Wahba, 2008. "Exploring the moderating effect of financial performance on the relationship between corporate environmental responsibility and institutional investors: some Egyptian evidence," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 15(6), pages 361-371, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Zeng, Yongliang & Zhao, Xiangfang & Zhu, Yiwen, 2023. "Equity incentives and ESG performance: Evidence from China," Finance Research Letters, Elsevier, vol. 58(PC).
    2. Nie, Song & Liu, Junxian & Zeng, Gang & You, Jiyuan, 2023. "Local government debt pressure and corporate ESG performance: Empirical evidence from China," Finance Research Letters, Elsevier, vol. 58(PB).
    3. Anjun Hu & Xianzhu Yuan & Shuangshuang Fan & Shali Wang, 2023. "The Impact and Mechanism of Corporate ESG Construction on the Efficiency of Regional Green Economy: An Empirical Analysis Based on Signal Transmission Theory and Stakeholder Theory," Sustainability, MDPI, vol. 15(17), pages 1-24, September.
    4. Xiao, Zhongyi & Huang, Xinfei & Chen, Haitao, 2024. "The impact of corporate ESG performance on buyers’ bargaining power in the industrial chain: Evidence from China," Finance Research Letters, Elsevier, vol. 60(C).
    5. Zhang, Yanan & Zhang, Xiaoyu, 2024. "Top management team functional diversity and ESG performance," Finance Research Letters, Elsevier, vol. 63(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Xiaoling Yu & Kaitian Xiao, 2022. "Does ESG Performance Affect Firm Value? Evidence from a New ESG-Scoring Approach for Chinese Enterprises," Sustainability, MDPI, vol. 14(24), pages 1-40, December.
    2. Charl de Villiers & Jing Jia & Zhongtian Li, 2022. "Corporate social responsibility: A review of empirical research using Thomson Reuters Asset4 data," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(4), pages 4523-4568, December.
    3. Chen, Zhongfei & Xie, Guanxia, 2022. "ESG disclosure and financial performance: Moderating role of ESG investors," International Review of Financial Analysis, Elsevier, vol. 83(C).
    4. Rajesh, R. & Rajeev, A. & Rajendran, Chandrasekharan, 2022. "Corporate social performances of firms in select developed economies: A comparative study," Socio-Economic Planning Sciences, Elsevier, vol. 81(C).
    5. Muneer Shaik & Mohd Ziaur Rehman, 2023. "The Dynamic Volatility Connectedness of Major Environmental, Social, and Governance (ESG) Stock Indices: Evidence Based on DCC-GARCH Model," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 30(1), pages 231-246, March.
    6. Natalia Semenova, 2021. "Management control systems in response to social and environmental risk in large Nordic companies," International Journal of Corporate Social Responsibility, Springer, vol. 6(1), pages 1-11, December.
    7. Fiordelisi, Franco & Ricci, Ornella & Santilli, Gianluca, 2023. "Environmental engagement and stock price crash risk: Evidence from the European banking industry," International Review of Financial Analysis, Elsevier, vol. 88(C).
    8. Ramírez-Orellana, Alicia & Martínez-Victoria, MCarmen & García-Amate, Antonio & Rojo-Ramírez, Alfonso A., 2023. "Is the corporate financial strategy in the oil and gas sector affected by ESG dimensions?," Resources Policy, Elsevier, vol. 81(C).
    9. Khan, Muhammad Arif, 2022. "ESG disclosure and Firm performance: A bibliometric and meta analysis," Research in International Business and Finance, Elsevier, vol. 61(C).
    10. Alberto Barroso Del Toro & Laura Vivas Crisol & Xavier Tort-Martorell, 2022. "The Sustainability Narrative: A Multi Study Using Event Studies to Analyse the American Energy Companies Shareholder’s Reaction to Sustainability News," IJERPH, MDPI, vol. 19(23), pages 1-17, November.
    11. Renhong Wu & Jinbao Li & Yunhai Dai & Xiangdong Shen & Md. Alamgir Hossain, 2024. "Impact of Environmental, Social, and Governance on Innovation in Chinese Listed Firms," Sustainability, MDPI, vol. 16(17), pages 1-24, August.
    12. Hui Zhao & Ao Lei & Yuhui Li & Dingjun Hong, 2023. "The Sectoral and Regional Peer Influences on Heavy-Pollution Corporate Environmental, Social, and Governance Performance," Sustainability, MDPI, vol. 15(17), pages 1-42, August.
    13. Komath, Muhammed Aslam Chelery & Doğan, Murat & Sayılır, Özlem, 2023. "Impact of corporate governance and related controversies on the market value of banks," Research in International Business and Finance, Elsevier, vol. 65(C).
    14. Oh-Suk Yang & Jae-Hoon Han, 2023. "Assessing the Effect of Corporate ESG Management on Corporate Financial & Market Performance and Export," Sustainability, MDPI, vol. 15(3), pages 1-30, January.
    15. Heying Liu & Chan Lyu, 2022. "Can ESG Ratings Stimulate Corporate Green Innovation? Evidence from China," Sustainability, MDPI, vol. 14(19), pages 1-20, September.
    16. Paola Brighi & Antonio Carlo Francesco Della Bina & Valeria Venturelli, 2022. "Do ESG Investments Mitigate ESG Controversies? Evidence From International Data," Centro Studi di Banca e Finanza (CEFIN) (Center for Studies in Banking and Finance) 0084, Universita di Modena e Reggio Emilia, Dipartimento di Economia "Marco Biagi".
    17. Yang Yang & Jinmian Han, 2023. "Digital transformation, financing constraints, and corporate environmental, social, and governance performance," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(6), pages 3189-3202, November.
    18. Bang, Jeongseok & Ryu, Doojin & Yu, Jinyoung, 2023. "ESG controversies and investor trading behavior in the Korean market," Finance Research Letters, Elsevier, vol. 54(C).
    19. Mariani, Massimo & Caragnano, Alessandra & D'Ercole, Francesco & Frascati, Domenico, 2024. "Carbon intensity and market pricing: An asymmetric valuation," International Review of Financial Analysis, Elsevier, vol. 93(C).
    20. D'Souza, Reagan & Ho, Choy Yeing (Chloe) & Yang, Joey W., 2024. "The cost of corporate social irresponsibility for acquirers," Journal of Banking & Finance, Elsevier, vol. 162(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jijerp:v:20:y:2022:i:1:p:447-:d:1016778. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.