Peer Effects on Corporate Environmental Protection: Competition, Information Cascades or Career Concerns?

This study examines peer influence, and its underlying motives, on environmental protection performance. We find consistent evidence of peer effects on environmental protection performance among Chinese firms. When the average environmental protection score of industry peers increases by one point, the focal firm imitates and increases its future environmental score by 5.7%. We find that such peer effects are largely due to information cascades and managerial career concerns. Additional tests show that peer effects are more pronounced among non-stateowned enterprises and firms in low-polluting areas with a high pressure of regional economic growth.