How Environmental Regulation Affect Corporate Green Investment: Evidence From China

Firms are the major users of energy and therefore the major producers of environmental pollution, whereas few studies have discussed the impact of environmental regulation on green investment from micro-firm level. Based on the data of Chinese listed companies from 2008 to 2016, this paper empirically analysed the impact of three types of environmental regulation on corporate green investment. In addition, this research further classified these firms by property rights and discussed the moderating effect of regional marketization process. In order to overcome the endogeneity, instrumental variable method is employed. Our results demonstrate that there was an inverted U-shape relationship between command-control environmental regulation and corporate green investment, while market-based and public-participation environmental regulation are positively related to corporate green investment. When it comes to the heterogeneity of firms, compared with state-owned enterprises, non-state-owned enterprises made more green investment and were more sensitive to environmental regulation. Our further research found that marketization process positively moderated the relationship between environmental regulation and corporate green investment, and this moderating effect had a more significant impact on non-state-owned enterprises. This paper provides theoretical support for Chinese government to further improve the setting and the implementation of environmental regulation. (c) 2020 Elsevier Ltd. All rights reserved.