Ecological damage claim program and environmental violations: Evidence from a quasi-natural experiment in China

Whether the ecological damage claim program can resolve negative institutional and intergenerational externalities for pollution matters for sustainable development. We employ a difference-in-differences model and data on a panel of listed firms in heavily polluting industries from 2012 to 2017 to examine the effects of China's ecological damage claim pilot policy on corporate environmental violations. Our results show that the policy significantly decreased environmental violations by firms in the pilot cities compared to those in non-pilot cities. We examined whether environmental enforcement and compliance rates influenced violations and mitigated negative institutional and intergenerational externalities. We found that the policy also produced a deterrent effect on other firms. In addition, we found that the ecological claim policy performed better in areas with high levels of enforcement and environmental attention. We found also that more independent firms and firms with a larger environmental performance gap were more proactive.