Do Fiscal Environmental Protection Expenditures Crowd Out Corporate Environmental Protection Investments?

Abstract

This research investigates how fiscal environmental expenditures impact corporate environmental investments and whether corporations act as free-riders. Using a sample of 1688 firm-year observations from 2008 to 2019 in the Chinese context, we observe that fiscal environmental expenditures have a significantly negative “crowding-out” effect on corporate green investments, which is mediated by the disclosure of pollution emissions. Additionally, a heterogeneity analysis reveals that this negative impact is more pronounced for non-heavily polluted and state-owned corporations and corporations located in three major agglomerations. This finding remains robust when employing an instrumental variable approach to address potential endogeneity. Our study contributes to the current literature by providing new insights regarding government environmental protection behaviors’ impacts on corporate green behaviors. The study also provides insights for policymakers to focus more on light-polluting corporations and state-owned corporations, because they have more chances to avoid environmental responsibilities.

Research on the impact of fiscal environmental protection expenditure on agricultural carbon emissions

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Can Enterprises in China Achieve Sustainable Development through Green Investment?

“…Government environmental spending, according to Hong et al, can lead to businesses adopting a free-rider mentality and avoiding environmental responsibility, which has a detrimental effect on how effective that spending is. Corporate green investment is negatively impacted by government environmental spending, or "crowding out" [56]. However, Zhang et al came to the conclusion that government subsidies have a favorable impact on corporate environmental investment [57] and that the association between government subsidies and corporate environmental investment can help decision-makers develop policies and allocate limited resources.…”

Environmental regulation, land use efficiency and industrial structure upgrading: Test analysis based on spatial durbin model and threshold effect

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