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Incentive or Barrier: Evidence from Environmental Policy and Corporate Sustainability in China

Author

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  • Yuanxin Li

    (School of Business, Ningbo University, Ningbo 315211, China
    Merchants’ Guild Economics and Cultural Intelligent Computing Laboratory of Ningbo University, Ningbo 315200, China)

  • Xinmiao Zhou

    (School of Business, Ningbo University, Ningbo 315211, China
    Merchants’ Guild Economics and Cultural Intelligent Computing Laboratory of Ningbo University, Ningbo 315200, China)

  • Huihong Liu

    (School of Business, Ningbo University, Ningbo 315211, China)

  • Jia Wu

    (School of Business Administration, Huaqiao University, Quanzhou 362021, China)

Abstract

The green transition of polluting firms is critical for achieving sustainable economic development. While previous research has explored the relationship between environmental policy and corporate pollution, it has often neglected the sustainability challenges faced by firms. Drawing on data from listed companies in China from 2008 to 2022, this paper empirically examines the impact of environmental policy on the risk-taking behavior of polluting firms. Building on this analysis, we assess the ecological impact, characteristics, and underlying mechanisms of a specific policy, while proposing solutions to promote sustainability in polluting firms. The findings indicate that, although environmental policy reduces the risk-taking levels of polluting firms, it has not been effective in curbing pollution emissions. This effect is particularly pronounced in firms exhibiting characteristics such as low-quality environmental information disclosure, industry resource crowding, and stringent regional assessments. The policy heightens financing constraints and investment costs for polluting firms and diminishes their expectations for future growth, ultimately suppressing both their capacity and willingness to take risks. Further analysis suggests that environmental coordination regulations and green transition guidance can encourage risk-taking behavior among polluting firms. These findings offer empirical evidence from the perspective of polluting firms, providing valuable insights into addressing the sustainability dilemma.

Suggested Citation

  • Yuanxin Li & Xinmiao Zhou & Huihong Liu & Jia Wu, 2024. "Incentive or Barrier: Evidence from Environmental Policy and Corporate Sustainability in China," Sustainability, MDPI, vol. 16(24), pages 1-34, December.
    • Handle: RePEc:gam:jsusta:v:16:y:2024:i:24:p:11158-:d:1547812
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