The real effect of legal institutions: Environmental courts and firm environmental protection expenditure |
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| Institution: | 1. Government Accounting Research Institute, Zhongnan University of Economics and Law, China;2. College of Economics and Management, Southwest University, China;3. School of Economics, Huazhong University of Science and Technology, China;1. The World Bank, United States;2. Georgetown University, United States;1. School of Public Affairs and Administration, University of Electronic Science and Technology of China, China;2. School of Public Management, Hunan University, China;1. China Center for Economic Studies, Fudan University, No. 600 Guoquan Road, Shanghai, 200433, China;2. China Merchants Securities CO., LTD, China;3. University of Southern California, Department of Economics, KAP, Los Angeles, CA 90089, USA;4. National Bureau of Economic Research (NBER), USA;5. School of Economics, Fudan University, No. 600 Guoquan Road, Shanghai, 200433, China;1. Lee Kuan Yew School of Public Policy, National University of Singapore, 469C Bukit Timah Road, 259772, Singapore;2. Department of Public Finance and Wang Yanan Institute for Studies in Economics, Xiamen University, Xiamen, 361005, China;3. School of Economics and Management, Tsinghua University, Beijing, 100084, China;4. School of Economics, National University of Singapore, 117570, Singapore |
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| Abstract: | This paper evaluates the real effects of environmental justice reform on environmental governance at the firm level. Using the establishment of environmental courts in China as a quasi-natural experiment, our difference-in-differences estimation shows that: (1) environmental courts significantly enhance environmental investment by firms, and this relationship is robust to different specifications and alternative measures; (2) three possible channels are the improved levels of justice and enforcement of environmental protection, and the mitigation of local government intervention; (3) our findings are particularly pronounced in subsamples with severe local protectionism, state-owned enterprises (SOEs), and non-SOEs with political connections; (4) at the city-level, environmental courts significantly increase air quality and promote cities to cross the inflection point of the environmental Kuznets curve earlier. Overall, this paper reveals the micro-mechanisms behind the real effects of environmental justice on firm environmental investment, thus providing timely implications for regulators concerned with environmental protection. |
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| Keywords: | Environment courts Environmental protection expenditure Quasi-natural experiment Local protectionism China G31 K42 Q53 Q58 |
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