Do environmental subsidies from the government result in better environmental performance by firms?

Abstract

Given the prevailing global environmental crisis, this inquiry pertains to the strategies employed by governments to motivate firms towards enhancing their environmental performance via the utilization of environmental subsidies. This study examines the impact of government environmental subsidies on the environmental performance of firms, utilizing data from Chinese A-share listed companies. Additionally, it investigates the moderating effect of executive short-sightedness on this relationship. This study demonstrates that there exists a noteworthy positive correlation between government environmental subsidies and corporate environmental performance. Additionally, it highlights the significance of green innovation as a mediating mechanism through which government environmental subsidies can effectively enhance corporate environmental performance. Executive myopia has a negative moderating effect on the relationship between government environmental subsidies and both green innovation and corporate environmental performance. Hence, it is recommended that the government should formulate a more scientifically grounded and rational environmental subsidy policy in order to incentivize enterprises to actively participate in green innovation and enhance their environmental efficacy. Simultaneously, it is desirable that corporate executives relinquish myopic perspectives and prioritize long-term corporate interests in order to attain sustainable corporate growth.