Environmental Regulation, Executives' Environmental Awareness and Corporate Green Innovation

Mengtong Chen
School of Economics and Management, East China Jiaotong University, Nanchang 330013, Jiangxi, China
Xiang Li
School of Information Engineering, East China Jiaotong University, Nanchang 330013, Jiangxi, China

Abstract:

The modification of the Environmental Protection Law indicates China's willingness to ecological sustainability, making it move at the same rate as economic development in light of the changing circumstances and issues in the environmental area. The research sample for this work is A-share listed firms in China from 2011 to 2019, focused upon Porter's hypothesis. It employs a double difference model to examine the impact and mechanism of the new Environmental Protection Law's implementation on the green innovation of highly polluting firms, utilizing the enactment of the new Environmental Protection Law as a quasi-natural experiment. The findings support Porter's hypothesis theory because they demonstrate a massive increase in green innovation among heavy polluters following the new Environmental Protection Law's implementation. According to a micro-psychological perspective, the new Environmental Protection Law can significantly advance executives in highly polluting companies' environmental consciousness, and executives' environmental consciousness performs a moderating effect. Further research reveals that SOEs are more likely to be stimulated by the implementation of the new Environmental Protection Law; regional studies based on carbon trading pilots reveal that firms participating in these pilots may benefit from the new Environmental Protection Law; and when multiple executive traits are taken into account, other executive traits also affect green innovation of firms.