How Environmental Regulation Affects Green Investment of Heavily Polluting Enterprises: Evidence from Steel and Chemical Industries in China

Abstract

Environmental protection is the top priority in the development process of all countries in the world, which directly affects public health. In response to growing environmental challenges, the government is implementing increasingly stringent industry supervision and environmental regulations. However, the impact of environmental regulation on investment has not formed a unified conclusion, and few studies have discussed this effect at the micro-enterprise level. This paper uses multiple regression analyses to investigate the effect of environmental regulation on green investments of heavily polluting enterprises in China. Using the data of listed companies in the steel and chemical industries of the Shanghai Stock Exchange and Shenzhen Stock Exchange, we find that the increasing intensity of government environmental regulation will inhibit green investments of heavily polluting enterprises. This paper further classifies the property rights of these enterprises and discusses the role of regional environmental quality. From the perspective of property rights, increased government environmental supervision will inhibit green investments of state-owned enterprises (SOEs) and promote green investments of non-state-owned enterprises (NSOEs). From the perspective of the environmental quality of the region where the company is located, government environmental regulation will inhibit green investments of heavily polluting companies, regardless of the regional environmental quality. This paper not only provides new empirical evidence about the steel and chemical industries for Porter’s hypothesis, but also compensates for the lack of research on the impact of environmental regulation on corporate green investment at the micro-level.