Escalation of Scrutiny: The Gains from Dynamic Enforcement of Environmental Regulations

Blundell, Wesley; Gowrisankaran, Gautam; Langer, Ashley

doi:10.1257/aer.20181012

Cited by 74 publications

(21 citation statements)

References 46 publications

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“…Environmental regulation is based on public power and makes firms actively or passively bear the environmental costs generated by their product behavior. On the one hand, formal environmental regulation sets the bottom line for enterprises' environmental behavior and impose penalties for violations of relevant laws and regulations, which increases the direct cost of enterprises' production and operation (Gray and Shimshack, 2011;Ryan, 2012;Blundell et al, 2020). On the other hand, as China's environmental policy system becomes more standardized and systematic, public awareness of environmental protection has increased, environmental factors are incorporated into investment decisions by investors (Edmans, 2011;Chordia et al, 2014;Matallín-Sáez et al, 2019), and environmental performance have become an important criterion for government evaluation (Heberer and Senz, 2011).…”

Section: Environmental Regulation and Corporate Environmental Behaviormentioning

confidence: 99%

Does environmental regulation promote green merger and acquisition? Evidence from the implementation of China’s newly revised Environmental Protection Law

Han

Wang

Pang

2022

Front. Environ. Sci.

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Green merger and acquisition (Green M&A) is one of the ways of corporate environmental investment, which is vital for their green transformation and sustainable development. With the implementation of the newly revised Environmental Protection Law in 2015, this paper investigates the impact of environmental regulation on corporate green M&A using the Difference-in-Difference method with a sample of Chinese listed companies from 2007 to 2020. We found that firms’ green M&A increases significantly after the implementation of the new Environmental Protection Law. The promotion effect is more pronounced when the firm is state-owned or faces lower financing constraints. Further analysis reveals that green M&A significantly reduces firms’ environmental management costs, enhances green innovation, and has no effect on market performance. This result confirms that after the implementation of the new Environmental Protection Law, companies engage in green M&A for cost and innovation motives rather than market motives.

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Section: Environmental Regulation and Corporate Environmental Behaviormentioning

confidence: 99%

Does environmental regulation promote green merger and acquisition? Evidence from the implementation of China’s newly revised Environmental Protection Law

Han

Wang

Pang

2022

Front. Environ. Sci.

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“…The bureaucrat may actually want to inspect the operation rather than the adoption of the clean technology. Indeed, there are additional benefits from dynamic regulation (Blundell et al, 2020). Relatedly, competition among bureaucrat may also lead to an improved outcome (Amir & Burr, 2015; Liu et al, 2022).…”

Section: Discussionmentioning

confidence: 99%

Can corruption encourage clean technology transfer?

Shen

Zhang

2022

J Public Economic Theory

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We study the impact of environmental regulation on the transfer of a clean technology where bureaucrats are needed for government intervention. In the absence of corruption, when environmental taxes are low, a technology transfer always takes place and it increases total outputs, but may lead to higher pollution levels. However, when corruption is possible, a firm with a dirty technology may choose to bribe a corruptible bureaucrat who will underreport the actual level of emissions, thereby hindering the transfer of clean technology. We show that a less strict anticorruption policy may lead to more bribing, but encourage technology transfers. Moreover, an environment-oriented government would set a deterrent environmental tax to reduce pollution, while an output-oriented government would set a minimum tax rate to eliminate corruption and induce technology transfers. However, a balanced government would tolerate corruption when the cost of bribing is low and the clean technology is sufficiently efficient.

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“…They are also planning to roll out a real-world driving test eventually. Other approaches to reduce non-compliance include increasing the frequency of inspection (Alm et al 2014, Gray andShimshack 2011), less predictive monitoring (Germani et al 2017, Muehlenbachs et al 2016, Shimshack 2014, targeting repeat violators by charging a higher penalty or initiating more frequent inspections (Blundell et al 2018), issuing over-compliance certification (Nyiwul et al 2015), disseminating pollutants information publicly (Fu et al 2018), and posting watchlists of violators (Evans 2016). Regulators can also use third-parties to enhance monitoring such as relying on competitors' tip-offs (Plambeck and Taylor 2018) or NGOs' certification (Murali et al 2019).…”

Section: Discussionmentioning

confidence: 99%

The Effect of Tightening Standards on Automakers’ Non‐compliance

Chopra

Chen

2021

Production and Operations Management

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T his study investigates how tightening standards can result in greater non-compliance, especially when market and regulatory interests are misaligned. We confirm a causal relationship that explains the highly publicized auto industry noncompliance phenomenon where on-road NOx emissions exceeded standards. Based on a 15-year on-road vehicle emissions dataset covering 148,837 vehicles from 42 automakers in the EU, we use regression discontinuity to identify the causal impact of standards tightening on non-compliance by controlling other confounding factors. Our results suggest that in the absence of effective monitoring, tightening standards directly drives up automakers' non-compliance. Furthermore, we find that automakers facing more intense substitution pressure from competitors or with less advanced emissions control technology have a higher non-compliance rate. Our findings speak to both policymakers as well as managers in the private sector. When setting limit-based performance goals in situations with conflicting interests and imperfect monitoring, they should anticipate non-compliance from the regulated parties. Our results suggest that tightening standards in such situations should be accompanied by stricter monitoring or other actions that discourage non-compliance.

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Escalation of Scrutiny: The Gains from Dynamic Enforcement of Environmental Regulations

Cited by 74 publications

References 46 publications

Does environmental regulation promote green merger and acquisition? Evidence from the implementation of China’s newly revised Environmental Protection Law

Does environmental regulation promote green merger and acquisition? Evidence from the implementation of China’s newly revised Environmental Protection Law

Can corruption encourage clean technology transfer?

The Effect of Tightening Standards on Automakers’ Non‐compliance

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