Research On The Difference Influence Mechanism Of Command And Market Environmental Regulations On Enterprise Performance

In China,severe environmental pollution has emerged alongside the long-term extensive economic growth method.How to achieve economic development and reduce environmental pollution is an important issue for the Chinese government.To control the negative environmental externalities in the production process of enterprises,the Chinese government has made a series of environmental protection policies.In the early days,distinct characteristics of administrative orders can be seen in the environmental protection policies of China.A series of pollutant emission standards have been issued by the government,and enterprises have been forced to implement them.As China’s marketization process deepened and regulations improved,market-based environmental protection policies have gradually been implemented in several regions in China.It engendered controversy that the relationship between environmental regulation and enterprise development.On the one hand,environmental regulations implemented by the government have forced companies to spend part of their funds on environmental pollution control,thus reducing their R&D investment and weakening their competitiveness.On the other hand,environmental regulations have stimulated enterprises’innovation.Innovation can not only reduce environmental pollution but also enhance corporate competitiveness.Based on these two viewpoints,many studies have been carried out,but no agreed conclusion have achieved yet.Under this background,this thesis studies the difference influence of China’s command and market environmental regulations on enterprise performance.In this thesis,the effects of different types of environmental regulation on SO₂ are tested at the same time.The results can reflect the real effects of different environmental policies in current China.Market-based environmental regulation is more common in developed countries,but the implementation effect in developing countries with imperfect policy systems still needs to be further discovered and confirmed.This thesis studies the single policy effect and policy differentiation effect of command-based environmental regulation（environmental protection key city policy）and market-based environmental regulation（emission trading policy）in China,the world’s largest developing country.Due to the emission trading policy began to be implemented nationwide in 2017,this thesis selects the listed companies in the top three industries of SO₂emissions in China from 2004 to 2017 as samples and uses the difference-in-differences model to identify the net effect of the policy and overcome the endogenous bias caused by the subjective selection of the samples.This thesis studies the impact of different types of environmental regulation on enterprises’environmental performance and economic performance and analyzed the impact mechanism.That is whether the differentiated impact of two types of environmental regulation on the technological innovation of enterprises would bring about development differentiation,and further leads to improving enterprises’environmental performance and economic performance.A variety of robustness tests have also been carried out,including parallel trend test,propensity score matching test and substitution variables.Also,it excludes the impacts of economic crisis,carbon emission trading,Olympic Blue,environmental protection supervision and other policies.The empirical results show that a significant positive effect on enterprises’environmental performance can be achieved by both command-based environmental regulation（environmental protection key city policy）and market-based environmental regulation（emission trading policy）.It means that the basic policy effects of the two environmental regulations have been realized.However,only market-based environmental regulation positively impacts enterprises’economic performance.In contrast,no obvious influence of command-based environmental regulation on economic performance has been observed.It indicates that the win-win result of economic development and environmental protection has not been achieved by command-based environmental regulation in China,while achieved by market-based environmental regulation.Furthermore,the differentiation impact mechanisms of two types of environmental regulations are explained.It is disclosed that only market-based environmental regulation lifts enterprises’technological innovation and the consequent the economic performance.In contrast,the command-based environmental regulation shows no promotion of enterprises’technological innovation.To illustrate the net effect of policy,a series of robustness tests have also been conducted and the results support the above conclusions.In addition,the heterogeneity of environmental regulation intensity has been analyzed.In addition,the heterogeneity analysis of the intensity of environmental regulation is also carried out.The empirical results show that only in areas with higher regional environmental law enforcement intensity,environmental regulation can play its basic policy effect,that is,improve the environmental performance of enterprises.In areas with low law enforcement intensity,the policy effect is not obvious.Moreover,in state-owned enterprises,command environmental regulation shows better policy effects than market environmental regulation,while private enterprises are the opposite.To sum up,it is found that market-based environmental regulation supports the Porter hypothesis,that is,it stimulates the R&D investment of enterprises.Command environmental regulation does not show similar effects.This research further puts forward policy suggestions based on different levels of government,industry and enterprises to improve enterprise performance and technological innovation.First,the government should improve the environmental protection legislation mechanism,enhance supervision system on environmental protection,strengthen the implementation of policies,conduct differentiated management according to the intensity of regulations,and optimize regional policies.Second,the industry should play a dominant role in the market,Policy dividends of environmental protection should be enhanced.The supervision over heavy pollution industry should be strengthened.Technological innovation of enterprises should be encouraged,and economic performance should be promoted when maintaining environmental performance.Finally,enterprises should take environmental regulation seriously,and improve independent innovation capabilities.An environmental management structure should be established in a company.Corporate governance constraints should be optimized and non-state-owned enterprises should be guided to trade flexibly.