Environmental Regulation And Corporate Behavior In China

Environmental regulation,which is an important institutional factor affecting corporate behavior,draws widely concern in theory and practice,and the impact of environmental regulation on corporate debt financing,innovation and profitability is a hot topic in academic circles.Up to now,Western scholars have achieved fruitful research results based on the environmental regulation in Europe and the United States.But the research based on the environmental regulation in China still have some deficiencies on the whole,and the research scope and depth need to be further expanded.Currently,few studies have analyzed the impact of the environmental regulation in China on corporate debt financing,and there is no corresponding theoretical analysis and convinsing empirical evidence.As for the impact of the environmental regulation in China on corporate innovation and profitability,the research perspective in the existing literature is relatively simple,which is limited to a single dimension to study the relationship between environmental regulation and corporate innovation or profitability,while ignoring the soft constraints of the environmental regulation in China during the transition period.This problem has led to the inability of relevant research to fully reveal the impact of environmental regulation on corporate innovation and profitability in China's secific context.In order to expand the existing research,this paper,based on the institutional characteristics of China's transition period,studies the impact of the environmental regulations in China on corporate debt financing,innovation and profitability by constructing theoretical models and using the data of listed companies.Firstly,based on the Green Credit Policy,this paper studies the impact of the environmental regulation in China on corporate debt financing.By constructing a bank's credit decision-making model,this paper reveals three ways in which the Green Credit Policy affects firms' credit availability.Through restricting the total amount of bank credit,the Green Credit Policy will curb corporate debt financing in the high energy-consuming and high-pollution(Two-high)industries.However,the policy also leads to the environmental performance effect and bank credit discrimination effect,as it strengthens the impact of environmental performance on corporate debt financing and weakens the bank's credit discrimination.Under the condition of the total amount of credit input remains unchanged,the two effects will suppress the debt financing of state-owned enterprises and promote the growth of borrowing by private enterprises.Using the panel data of listed companies and the DID method,we find that with the combined effect of the restriction of total bank credit,environmnental performance effect and bank credit discrimination effect,the Green Credit Policy has inhibited the loan growth of state-owned enterprises,but it has no significant impact on the debt financing of private enterprises.Furthermore,the mechanisms of the environmental performance effect and bank credit discrimination effect are also supported by empirical results in this paper.The research in this paper provides a comprehensive analysis perspective for understanding the impact of China's Green Credit policy on corporate debt financing and its heterogeneity.Furthermore,it enriches and supplements the existing research on the relationship between environmental regulation and corporate debt financing behavior.Secondly,whether environmental regulation can promote corporate innovation,which is the key to achieving the win-win situation for economic development and environmental protection,is widely concerned by the theoretical and practical circles.This paper studies how environmental regulation affects corporate innovation from the perspective of soft constrains of environmental regulation.This paper is the first to develop a theoretical model to introduce the role of soft constraint of environmental regulation into the theoretical framework of Porter hypothesis,and analyze how the environmental regulation and soft constraint of environmental regulation affect corporate innovation.Based on the policy change of the SO2 emission charge from 2007 to 2014,we examine the impact of environmental regulation and the soft constraint of environmental regulation in China on corporate innovation by adopting a DID estimation.We find the evidence that environmental regulation in China can promote corporate innovation during the economic transition period.However,state owned enterprises have much more significant soft constraint problem than private enterprises,which weakens their incentives for innovation investment.What we find not only provides empirical evidence for the existence of the soft constrain of environmental regulation in China,but also enriches and expands the research on the relationship between environmental regulation and corporate innovation.Furthermore,the Porter Hypothesis puts forward the possibility that environmental regulation can achieve a win-win situation for environmental protection and economic development.Its establishment or not has important research value and policy guiding significance.This paper studies the impact of environmental regulation on economic sustainable development from the perspective of soft constrain of environmental regulation.Based on the decision-making model of corporate innovation investment,we introduce the threshold effect of innovation investment and analyze the impact of environmental regulation and soft constraint of environmental regulation on corporate profitability.Empirically,we examine the Porter Hypothesis by adopting a DID estimation based on the policy change of the SO2 emission charge from 2007 to 2014.We find that it's possible to achieve a win-win situation for environmental protection and economic development in China during the economic transition period.However,due to the differences in the soft constraint of environmental regulation,the environmental regulation brings completely different profitability impacts among enterprises of different ownership.For state owned enterprises,the innovation incentive introduced by environmental regulation is restrained by the soft constraint of environmental regulation,which leads to higher business costs and lower profits.While for the private enterprises,which have no the problem of the soft constraint of environmental regulation,environmental regulation stimulates significant innovation effect and significantly improves the corporate profitability through innovation compensation effect What we find expands the research on the relationship between environmental regulation and corporate profitability.Furthermore,this paper provides policy reference for the coordinated development of economy and environment in China.