Environmental Regulation,Implementation Bias And Enterprise Performance

This paper constructs two-sector model and a game model to analyze the mechanism of environmental regulation affecting enterprise performance and clarify the impact of implementation bias on the mechanism theoretically.What’s more it adopts DID method by taking the implementation of the "two control zones" policy as a quasi-natural experiment to examine the net effect of environmental regulation on enterprise performance with data from the database of Chinese industrial enterprises from 1998 to 2007.At the same time,it estimates once more by dividing the enterprises into two groups according to the degree of local government’s environmental regulation implementation bias: the soft environmental regulation constraint and the hard environmental regulation constraint.It finds that the“two-control zones” policy has a significant positive impact on corporate performance,but this positive impact effect mainly stems from the strict implementation of environmental regulation in the hard-constrained region.The inspection results of the impact mechanism indicate that the positive impact of the “two-control zones” policy on enterprises performance is mainly achieved through enterprise innovation and scale.The strict implementation of the “two-control zones” policy can in turn force corporate technological innovation activities by increasing corporate costs.However,when there is a deviation in the implementation of environmental regulation policies,environmental regulation policies do not increase the total cost of the enterprise,and therefore cannot also have a positive incentive effect on corporate innovation activities and hinder the improvement of corporate performance.The hard environmental regulation constraint are barriers to entry for potential enterprises,therefore,the existing enterprises improve their performance as scale expanded.When implementation bias exist,environmental regulation can’t stop new enterprises from entering the market.Given the research findings,this paper has proposed corresponding recommendations.