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How does anti-corruption policy affect the sensitivity of green innovation to executive incentives?

Author

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  • Xu Wang

    (Shandong University of Finance and Economics)

  • Xu Chu

    (Xiamen University)

  • Chien-Chiang Lee

    (Nanchang University)

Abstract

Due to the unique contribution it makes to both environmental and financial performances, green innovation has become a key factor driving organizations to achieve sustainable development. Policy change presents a good opportunity to discover the drivers of corporate behavior. Considering the way in which anti-corruption policy can affect firms’ innovation environment and innovation decisions, this research takes China’s anti-corruption policy as a shock condition and conducts a quasi-experiment to discuss the impact of anti-corruption policy on the sensitivity of green innovation to executive incentives in China. The main findings reveal that anti-corruption policy significantly improves the sensitivity of green innovation to equity incentives and decreases the sensitivity to control rights incentives, but does not influence the sensitivity to reputation incentives. These findings show the integrated impact of an exogenous environment and endogenous governance upon green innovation. We also reveal the difference of this integrated impact in the context of various natures of ownership. Specifically, in private enterprises, anti-corruption policy can optimize the sensitivity of green innovation to equity incentives, while in state-owned enterprises the sensitivity of green innovation to reputation incentives combined with equity incentives or with control rights incentives significantly improves. The findings presented in this paper reveal the micro-economic effects of anti-corruption policy on green innovation and instruct firms to optimize executive incentive arrangements to green development under the background of China’s anti-corruption campaign.

Suggested Citation

  • Xu Wang & Xu Chu & Chien-Chiang Lee, 2023. "How does anti-corruption policy affect the sensitivity of green innovation to executive incentives?," Economic Change and Restructuring, Springer, vol. 56(1), pages 79-109, February.
    • Handle: RePEc:kap:ecopln:v:56:y:2023:i:1:d:10.1007_s10644-022-09413-4
    DOI: 10.1007/s10644-022-09413-4
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