Environmental regulation, firms’ bargaining power, and firms’ total factor productivity: evidence from China

Environmental regulation, firms’ bargaining power, and firms’ total factor productivity: evidence from China

The relationship between environmental regulation and firms’ total factor productivity (TFP) has always been a hot topic in environmental economics, but the conclusions are still mixed. Employing a sample of 14,375 firm-year observations in China from 2010 to 2018, our research explores whether and...

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Bibliographic Details
Published in:Environmental science and pollution research international 2022-02, Vol.29 (6), p.9341-9353
Main Authors: Yang, Shuwang, Wang, Chao, Zhang, Hao, Lu, Tingshuai, Yi, Yang
Format: Article
Language:eng
Subjects:
Aquatic Pollution
Atmospheric Protection/Air Quality Control/Air Pollution
China
Cities
Earth and Environmental Science
Ecotoxicology
Efficiency
Environment
Environmental Chemistry
Environmental economics
Environmental Health
Environmental regulations
Executive compensation
Metallurgy
Productivity
Research Article
Waste Water Technology
Water Management
Water Pollution Control
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Summary:The relationship between environmental regulation and firms’ total factor productivity (TFP) has always been a hot topic in environmental economics, but the conclusions are still mixed. Employing a sample of 14,375 firm-year observations in China from 2010 to 2018, our research explores whether and when environmental regulation could trigger firms, to enhance TFP. The available evidence leads us to cautiously conclude that: (1) Environmental regulation notably improves firms’ TFP, the conclusion still holds after alleviating the endogenous problems and a battery of robustness tests. (2) Firms’ bargaining power significantly weakens the effect of environmental regulation on firms’ TFP. (3) Compared with non-state-owned firms and non-heavy-polluting industries, environmental regulation has a greater impact on state-owned firms and heavy-polluting industries; higher executive compensation does not motivate firms to improve TFP. Compared with firms headquartered in non-provincial capital cities, environmental regulation has a greater impact on firms’ TFP in provincial capital cities. Overall, the findings of our research are extremely relevant for the governments, investors, and firms’ managers; this paper provides China’s micro-firm-level evidence for the Porter hypothesis.
ISSN:0944-1344
1614-7499