Environmental Regulation, Enterprises' Bargaining Power, and Enterprises' Total Factor Productivity: Evidence from China

Abstract

The relationship between environmental regulation and enterprises' total factor productivity (TFP) has been a hot topic in the field of environmental economics, but the conclusions are still mixed. Employing a sample of 14,110 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 enterprises' TFP, the conclusion still holds after a series of robustness tests. 2) Enterprises' bargaining power significantly weakens the influence of environmental regulation on enterprises' TFP. 3) Compared with non-state-owned enterprises and non-heavy-polluting industries, environmental regulation has a greater impact on state-owned enterprises and heavy-polluting industries; higher executive compensation does not motivate firms to improve TFP; compared with enterprises headquartered in non-provincial capital cities, environmental regulation has a greater impact on enterprises' TFP in provincial capital cities. Overall, the findings of our research are extremely relevant for the government, investor, and enterprise's manager, this paper provides micro-firm-level evidence for the Porter hypothesis in practice in China.

Can green finance credit allocation enable green innovation quality improvement -- Evidence from China's manufacturing firms

“…Green nance credit policies play a crucial role in guiding the optimal allocation of resources between polluting and green industries, and in enhancing the e ciency of resource allocation within green creditrestricted industries [21] . In this context, less productive rms have an opportunity to access production resources at lower costs, allowing them to compete more effectively in the market.…”