Environmental Penalties, Internal and External Governance, and Green Innovation: Does the Deterrence Effect Work?
Abstract
:1. Introduction
2. Literature Review
2.1. Environmental Penalties and Green Innovation
2.2. Internal and External Governance with Green Innovation
2.3. Summary and Critique
2.4. Research Hypotheses
3. Methodology and Research Design
3.1. Data and Samples
3.2. Empirical Econometric Model
3.3. Parameters and Descriptive Analysis
4. Empirical Results and Findings
4.1. Hypothesis 1
4.2. Hypothesis 2
4.3. Endogeneity and Heterogeneity Analysis
5. Discussion, Conclusions, Policy Implications, Limitations, and Further Research
5.1. Discussion
5.2. Main Conclusions
5.3. Policy Implications
5.4. Limitations and Future Research
Author Contributions
Funding
Institutional Review Board Statement
Informed Consent Statement
Data Availability Statement
Conflicts of Interest
References
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Type | Variables | Definition |
---|---|---|
Dependent variables | greenPatent | Numeric variable referring to the number of green patents registered yearly. |
lngreenPatent | Numeric variable referring to the natural log of green patent numbers registered yearly. | |
lngreenPatent1 | Numeric variable referring to the natural log of green patents numbers plus 1 registered yearly for the data analysis. | |
Independent variables | HiPollution | Dummy variable; 1 refers to the firm being listed as a high-pollution firms, while 0 indicates otherwise. |
Penalty | Dummy variable; 1 refers to firms being punished by the environmental authorities, and 0 indicates otherwise. | |
Growthgp | Numerical variable referring to the increase compared with the previous year. | |
External variable | Provpenalty | Numerical variable referring to the total cases of punishment issued by the environmental authorities in a province yearly. |
Firms’ parameters | shrholder1 | Numerical variable for the share percentage that the top shareholder owns. |
Controller | Dummy variable for firms’ actual controllers; 1 refers to related stated-owned firms, including local state-owned enterprises, the local state-owned asset administration bureau, central-state-owned enterprises, and universities; 0 refers to individuals, foreign capital, and workers’ unions. | |
Lnsize | Numerical variable for the size of the firm according to the natural log of total assets. | |
Liability | Numerical variable referring to the total liability divided by the total assets. | |
ReturnOA | Numerical variable referring to the net income divided by the total assets. | |
Penalties | punishTime | Numerical variable referring to the number of times that firms have been punished by the environmental authorities. |
punishAmount | Numerical variable referring to the amounts of penalty fines from the environmental authorities (unit: 10,000 RMB). | |
lnpunishAmount | Numerical variable referring to the natural log of penalty fines. | |
punishIntensity | Numerical variable for cumulative scoring for different types of penalties. |
Categories | Labels (Scoring for Severity) | |
---|---|---|
Warning, rectification before a certain deadline | 1 | |
Fines (units: 10,000 RMB) | Fines < 5 | 1 |
5 ≤ Fines < 20 | 2 | |
20 ≤ Fines < 40 | 3 | |
40 ≤ Fines < 60 | 4 | |
60 ≤ Fines | 6 | |
Seal up, seize, and confiscate illegal gains | 6 | |
Order to restrict production | 6 | |
Order for the suspension of production for rectification | 12 | |
Administrative detention for environmental crime | 12 |
Variable | Obs | Mean | Std. Dev. | Min | Max |
---|---|---|---|---|---|
HiPollution | 19.255 | 0.8568 | 0.3502 | 0 | 1 |
Penalty | 19.255 | 0.3138 | 0.4641 | 0 | 1 |
greenPatent | 19.255 | 2.060 | 1.160 | 0 | 728 |
lngreenPatent | 5.409 | 1.127 | 1.128 | 0 | 6.590 |
lngreenPatent1 | 19.255 | 0.423 | 0.8285 | 0 | 6.592 |
Growthgp | 19.255 | 0.4205 | 6.407 | −406 | 360 |
Provpenalty | 19.255 | 1165 | 2.595 | 0 | 17,106 |
shrholder1 | 19.255 | 0.3699 | 0.1603 | 0.0029 | 0.8999 |
Controller | 19.255 | 0.5131 | 0.4998 | 0 | 1 |
Lnsize | 19.255 | 2.189 | 1.415 | 12 | 29 |
LiabilityA | 19.255 | 0.5646 | 7.525 | 0.00056 | 1.013 |
ReturnOA | 19.255 | 0.0309 | 0.4212 | −48.316 | 8.449 |
punishTime | 6.043 | 3.144 | 620 | 0 | 77 |
punishAmount | 6.043 | 133.33 | 1016 | 0 | 17,036.14 |
lnpunishAmount | 5.457 | 2.867 | 1.686 | −0.223 | 9.743 |
punishIntensity | 6.043 | 5.264 | 4.952 | 1 | 24 |
No. | Variable | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
1 | HiPollution | 1 | ||||||||||||
2 | Penalty | −0.60 * | 1 | |||||||||||
3 | greenPatent | −0.07 * | 0.07 * | 1 | ||||||||||
4 | growthgp | −0.03 * | 0.02 * | 0.57 * | 1 | |||||||||
5 | provpenalty | −0.07 * | 0.03 * | 0.07 * | 0.02 | 1 | ||||||||
6 | shrholder1 | 0.03 * | 0.05 * | 0.04 * | 0.02 | −0.09 * | 1 | |||||||
7 | controller | 0.02 * | 0.07 * | 0.04 * | 0.02 | −0.23 * | 0.26 * | 1 | ||||||
8 | lnsize | 0.06 * | 0.28 * | 0.10 * | 0.12 * | 0.19 * | 0.1813 * | 1 | ||||||
9 | liabilityR | −0.06 * | 1 | |||||||||||
10 | ReturnOA | 0.05 * | 0.06 * | −0.09 * | 1 | |||||||||
11 | punishTime | 0.12 * | 0.06 * | 0.03 | −0.05 * | 0.17 * | 0.13 * | 0.28 * | 1 | |||||
12 | punishAmount | −0.03 | 0.09 * | −0.03 * | 0.06 * | 0.07 * | 0.12 * | 1 | ||||||
13 | punishInte~y | 0.09 * | −0.04 * | 0.08 * | 0.25 * | 1 |
Model 1 | Model 2 | Model 3 | Model 4 | |
---|---|---|---|---|
Yearprior > 0 (All Samples after Punishments) | ||||
punishTime | −0.110 | −0.162 | ||
(0.10) | (0.10) | |||
punishAmount | 0.002 | 0.002 * | ||
(0.00) | (0.00) | |||
punishIntensity | 0.029 | 0.004 | ||
(0.12) | (0.12) | |||
HiPollution | −3.756 ** | −3.961 *** | −3.934 ** | −3.780 ** |
(1.21) | (1.20) | (1.21) | (1.22) | |
ProvPenalty | 0.000 | 0.000 | 0.000 | 0.000 |
(0.00) | (0.00) | (0.00) | (0.00) | |
ShrHolder1 | 1.335 | 1.493 | 1.086 | 2.037 |
(4.14) | (4.14) | (4.14) | (4.16) | |
Controller | −1.365 | −1.374 | −1.372 | −1.372 |
(1.34) | (1.34) | (1.34) | (1.34) | |
lnSize | 8.535 *** | 8.318 *** | 8.393 *** | 8.515 *** |
(0.49) | (0.47) | (0.47) | (0.49) | |
Liability | 0.219 | 0.207 | 0.212 | 0.215 |
(0.16) | (0.16) | (0.16) | (0.16) | |
ReturnOA | −5.886 | −5.602 | −5.697 | −5.919 |
(4.38) | (4.37) | (4.38) | (4.38) | |
Constant | −183.5 *** | −179.1 *** | −180.6 *** | −183.3 *** |
(10.67) | (10.36) | (10.37) | (10.72) | |
R2 | 0.162 | 0.163 | 0.162 | 0.164 |
df_r | 1943 | 1943 | 1943 | 1943 |
Bic | 18,342 | 18,340 | 18,343 | 18,352 |
lngreenpantents1 | Model 1 | Model 2 | Model 3 | Model 4 |
---|---|---|---|---|
Yearprior ≥ 0 (All Samples after the Punishments) | ||||
punishTime | 0.005 | −0.001 | ||
(0.00) | (0.00) | |||
lnpunishAmount | 0.068 *** | 0.059 *** | ||
(0.01) | (0.02) | |||
punishIntensity | 0.014 ** | 0.009 | ||
(0.00) | (0.01) | |||
HiPollution | −0.094 * | −0.128 ** | −0.108 * | −0.132 ** |
(0.05) | (0.05) | (0.05) | (0.05) | |
ProvPenalty | 0.000 *** | 0.000 ** | 0.000 *** | 0.000 ** |
(0.00) | (0.00) | (0.00) | (0.00) | |
ShrHolder1 | −0.328 * | −0.125 | −0.294 | −0.119 |
(0.16) | (0.17) | (0.16) | (0.17) | |
Controller | −0.057 | −0.052 | −0.059 | −0.051 |
(0.05) | (0.05) | (0.05) | (0.05) | |
lnSize | 0.441 *** | 0.441 *** | 0.450 *** | 0.444 *** |
(0.02) | (0.02) | (0.02) | (0.02) | |
liabilityR | 0.010 | 0.008 | 0.011 | 0.009 |
(0.01) | (0.01) | (0.01) | (0.01) | |
ReturnOA | −0.186 | −0.229 | −0.213 | −0.237 |
(0.17) | (0.19) | (0.17) | (0.19) | |
constant | −8.903 *** | −9.093 *** | −9.161 *** | −9.191 *** |
(0.41) | (0.42) | (0.40) | (0.43) | |
R2 | 0.263 | 0.284 | 0.266 | 0.285 |
df_r | 1943 | 1755 | 1943 | 1753 |
bic | 5630 | 5049 | 5623 | 5061 |
Model 1 | Model 2 | Model 3 | Model 4 | Model 5 | ||||||
---|---|---|---|---|---|---|---|---|---|---|
Year of Penalty Imposed = 0 | 1 Year after Penalty = 1 | 2 Years after Penalty = 2 | 3 Years after Penalty = 3 | 4 Years after Penalty = 4 | ||||||
HiPollution | −1.133 | −0.777 | −1.343 | 0.049 | −0.500 | −1.490 | −2.299 | −2.327 | −4.548 * | −4.217 |
(1.31) | (1.29) | (1.21) | (1.53) | (1.55) | (1.24) | (1.68) | (1.72) | (2.27) | (2.34) | |
ProvPenalty | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | −0.000 | −0.000 | −0.000 | −0.000 |
(0.00) | (0.00) | (0.00) | (0.00) | (0.00) | (0.00) | (0.00) | (0.00) | (0.00) | (0.00) | |
ShrHolder1 | 7.320 | 9.688 * | 2.878 | 10.070 | 6.340 | 2.391 | 5.502 | 5.147 | −9.056 | −9.709 |
(4.55) | (4.47) | (4.38) | (5.33) | (5.41) | (4.45) | (5.87) | (5.96) | (7.94) | (8.08) | |
Controller | 0.233 | 0.099 | 0.462 | −0.220 | 0.050 | 0.434 | −1.854 | −2.021 | 0.800 | 0.641 |
(1.48) | (1.44) | (1.35) | (1.71) | (1.76) | (1.36) | (1.93) | (1.95) | (2.52) | (2.56) | |
lnSize | 5.233 *** | 5.167 *** | 2.684 *** | 6.118 *** | 6.003 *** | 2.573 *** | 4.726 *** | 4.678 *** | 6.005 *** | 6.071 *** |
(0.59) | (0.59) | (0.55) | (0.70) | (0.70) | (0.57) | (0.76) | (0.79) | (0.85) | (0.89) | |
liabilityR | −8.561 * | −8.243 * | 2.682 | −8.064 | −8.640 | 2.676 | −0.410 | −0.572 | 0.721 | 0.783 |
(3.97) | (3.87) | (3.45) | (4.36) | (4.46) | (3.46) | (4.89) | (4.93) | (0.75) | (0.76) | |
ReturnOA | −25.412 * | −25.254 * | 2.197 | −7.052 | −5.875 | 2.869 | −17.639 | −17.861 | −1.283 | −0.992 |
(12.30) | (12.12) | (8.75) | (9.36) | (9.59) | (8.80) | (9.45) | (9.59) | (4.80) | (4.87) | |
punishTime | −0.230 * | −0.350 ** | 0.112 | 0.094 | 0.008 | |||||
(0.12) | (0.13) | (0.12) | (0.16) | (0.20) | ||||||
punishAmount | 0.003 *** | 0.004 *** | −0.001 | −0.002 | −0.002 | |||||
(0.00) | (0.00) | (0.00) | (0.00) | (0.00) | ||||||
punishIntensity | 0.045 | −0.002 | 0.050 | 0.055 | −0.038 | |||||
(0.13) | (0.15) | (0.12) | (0.18) | (0.23) | ||||||
constant | −110.5 *** | −110.1 *** | −57.6 *** | −131.8 *** | −128.1 *** | −55.4 *** | −99.7 *** | −98.7 *** | −124.6 *** | −125.5 *** |
(12.04) | (12.12) | (11.57) | (14.62) | (14.72) | (12.10) | (15.81) | (16.55) | (18.79) | (19.78) | |
R2 | 0.222 | 0.268 | 0.117 | 0.255 | 0.206 | 0.120 | 0.176 | 0.178 | 0.228 | 0.230 |
df_r | 382.0 | 379.0 | 328.0 | 364.0 | 367.0 | 325.0 | 270.0 | 267.0 | 213.0 | 210.0 |
bic | 3.124.6 | 3.119.1 | 2.601.9 | 3.115.3 | 3.121.6 | 2.618.2 | 2.290.2 | 2.306.4 | 1.903.5 | 1.919.1 |
lngreenPatent | Model 1 | Model 2 | Model 3 | Model 4 | Model 5 |
---|---|---|---|---|---|
Year of Penalty Imposed = 0 | 1 Year after Penalty | 2 Year after Penalty | 3 Year after Penalty | 4 Year after Penalty | |
HiPollution | −0.372 * | −0.012 | −0.178 | −0.194 | −0.322 |
(0.17) | (0.17) | (0.17) | (0.19) | (0.23) | |
ProvPenalty | −0.000 | 0.000 | 0.000 | 0.000 | −0.000 |
(0.00) | (0.00) | (0.00) | (0.00) | (0.00) | |
ShrHolder1 | 0.575 | 1.266 * | 0.798 | 0.266 | −0.228 |
(0.57) | (0.58) | (0.63) | (0.62) | (0.81) | |
Controller | 0.251 | −0.004 | 0.045 | −0.033 | −0.214 |
(0.18) | (0.18) | (0.18) | (0.21) | (0.24) | |
lnSize | 0.429 *** | 0.441 *** | 0.253 ** | 0.388 *** | 0.524 *** |
(0.07) | (0.07) | (0.08) | (0.08) | (0.09) | |
liabilityR | −0.177 | −0.192 | 0.472 | 0.363 | 0.047 |
(0.56) | (0.48) | (0.48) | (0.58) | (0.10) | |
ReturnOA | −0.980 | 0.771 | 2.073 | −2.088 | 0.086 |
(1.48) | (0.81) | (1.57) | (1.37) | (0.96) | |
punishTime | −0.024 * | −0.017 | 0.012 | 0.001 | −0.009 |
(0.01) | (0.02) | (0.02) | (0.02) | (0.01) | |
lnpunishAmount | 0.041 | 0.089 | 0.073 | 0.012 | −0.016 |
(0.06) | (0.06) | (0.06) | (0.07) | (0.08) | |
punishIntensity | 0.033 | 0.003 | 0.008 | 0.008 | 0.001 |
(0.02) | (0.02) | (0.02) | (0.02) | (0.02) | |
constant | −8.752 *** | −9.391 *** | −5.362 ** | −7.745 *** | −9.962 *** |
(1.50) | (1.54) | (1.64) | (1.66) | (2.06) | |
R2 | 0.334 | 0.319 | 0.222 | 0.275 | 0.354 |
df_r | 153 | 161 | 159 | 133 | 90 |
bic | 508 | 545 | 548 | 466 | 336 |
Model 1 | Model 2 | Model 3 | Model 4 | |
---|---|---|---|---|
All Samples | All Samples | Yearprior < 0 | Yearprior ≥ 0 | |
HiPollution | −1.659 *** | −2.143 *** | −0.904 ** | −3.780 ** |
(0.29) | (0.23) | (0.28) | (1.22) | |
Penalty | 0.601 ** | |||
(0.22) | ||||
ProvPenalty | 0.000 *** | 0.000 *** | 0.000 * | 0.000 |
(0.00) | (0.00) | (0.00) | (0.00) | |
ShrHolder1 | −0.479 | −0.408 | 4.269 *** | 2.037 |
(0.53) | (0.53) | (0.92) | (4.16) | |
Controller | −0.162 | −0.123 | −0.955 ** | −1.372 |
(0.17) | (0.17) | (0.31) | (1.34) | |
lnSize | 2.289 *** | 2.295 *** | 2.761 *** | 8.515 *** |
(0.06) | (0.06) | (0.11) | (0.49) | |
Liability | 0.026 * | 0.026 * | 0.183 ** | 0.215 |
(0.01) | (0.01) | (0.06) | (0.16) | |
ReturnOA | −0.318 | −0.324 | −1.922 ** | −5.919 |
(0.19) | (0.19) | (0.71) | (4.38) | |
punishTime | −0.162 | |||
(0.10) | ||||
punishAmount | 0.002 * | |||
(0.00) | ||||
punishIntensity | 0.004 | |||
(0.12) | ||||
Constant | −46.729 *** | −46.308 *** | −59.200 *** | −183.354 *** |
(1.29) | (1.28) | (2.37) | (10.72) | |
R2 | 0.085 | 0.085 | 0.146 | 0.164 |
df_r | 19,246 | 19,247 | 4083 | 1941 |
Bic | 147.418 | 147.416 | 29.395 | 18.352 |
Model 1 | Model 2 | Model 3 | Model 4 | |
---|---|---|---|---|
Provpenalty < 5022 (Median) | Provpenalty < 5022 and Yearprior ≥ 0 | Provpenalty ≥ 5022 | Provpenalty ≥ 5022 and Yearprior ≥ 0 | |
HiPollution | −1.577 *** | −4.546 ** | −1.689 | −1.550 |
(0.30) | (1.47) | (1.11) | (2.04) | |
Penalty | 0.619 ** | 0.961 | ||
(0.22) | (0.95) | |||
ProvPenalty | 0.001 *** | 0.001 | −0.000 | −0.000 |
(0.00) | (0.00) | (0.00) | (0.00) | |
ShrHolder1 | −0.544 | −1.523 | 3.629 | 12.688 |
(0.54) | (5.11) | (2.25) | (6.55) | |
Controller | −0.114 | −1.261 | 0.628 | −0.473 |
(0.18) | (1.59) | (0.85) | (2.48) | |
lnSize | 2.112 *** | 8.875 *** | 3.819 *** | 7.682 *** |
(0.06) | (0.58) | (0.28) | (0.91) | |
Liability | 0.024 * | 0.230 | −1.031 | −7.537 |
(0.01) | (0.17) | (1.04) | (5.38) | |
ReturnOA | −0.284 | −6.980 | −4.658 | −13.501 |
(0.19) | (5.28) | (3.30) | (9.33) | |
punishTime | −0.189 | 0.181 | ||
(0.11) | (0.28) | |||
punishAmount | 0.002 * | 0.002 | ||
(0.00) | (0.01) | |||
punishIntensity | 0.028 | −0.071 | ||
(0.15) | (0.20) | |||
Constant | −43.119 *** | −190.883 *** | −80.448 *** | −165.380 *** |
(1.33) | (12.74) | (6.24) | (19.62) | |
R2 | 0.081 | 0.164 | 0.139 | 0.189 |
df_r | 17,582 | 1494 | 1655 | 436 |
Bic | 134.004 | 14.317 | 13.288 | 4.038 |
Model 1 | Model 2 | Model 3 | Model 4 | |
---|---|---|---|---|
lnsize < 22 (Median) | lnsize < 22 and Yearprior ≥ 0 | lnsize ≥ 22 | lnsize ≥ 22 and Yearprior ≥ 0 | |
HiPollution | −0.257 ** | −0.209 | −2.587 *** | −4.811 ** |
(0.09) | (0.55) | (0.48) | (1.51) | |
Penalty | 0.085 | 1.491 *** | ||
(0.07) | (0.36) | |||
ProvPenalty | 0.000 *** | 0.000 | 0.000 *** | 0.000 |
(0.00) | (0.00) | (0.00) | (0.00) | |
ShrHolder1 | −0.340 * | 2.172 | −1.986 * | −5.615 |
(0.17) | (2.05) | (0.86) | (5.09) | |
Controller | −0.266 *** | −0.414 | −0.522 | −2.276 |
(0.05) | (0.65) | (0.30) | (1.66) | |
lnSize | 0.236 *** | 0.706 | 4.885 *** | 14.265 *** |
(0.04) | (0.67) | (0.14) | (0.77) | |
Liability | 0.002 | −0.052 | −4.026 *** | −9.833 * |
(0.00) | (0.04) | (0.74) | (4.32) | |
ReturnOA | −0.015 | −1.053 | −1.744 * | −6.161 |
(0.04) | (1.28) | (0.85) | (8.03) | |
punishTime | 0.790 *** | −0.297 ** | ||
(0.20) | (0.11) | |||
punishAmount | 0.003 | 0.002 * | ||
(0.00) | (0.00) | |||
punishIntensity | 0.041 | −0.119 | ||
(0.05) | (0.15) | |||
Constant | −4.112 *** | −15.919 | −103.639 *** | −308.166 *** |
(0.80) | (13.83) | (3.03) | (16.58) | |
R2 | 0.021 | 0.077 | 0.119 | 0.218 |
df_r | 8299 | 411 | 10,938 | 1519 |
Bic | 36.511 | 2.681 | 89.270 | 14.642 |
Group | Before the Policy (Penalty) | After the Policy (Penalty) | Difference |
---|---|---|---|
Treatment Group | |||
Control Group | |||
Difference | (D-in-D) |
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Liu, Y.; Tang, L. Environmental Penalties, Internal and External Governance, and Green Innovation: Does the Deterrence Effect Work? Sustainability 2024, 16, 6955. https://doi.org/10.3390/su16166955
Liu Y, Tang L. Environmental Penalties, Internal and External Governance, and Green Innovation: Does the Deterrence Effect Work? Sustainability. 2024; 16(16):6955. https://doi.org/10.3390/su16166955
Chicago/Turabian StyleLiu, Yang, and Ling Tang. 2024. "Environmental Penalties, Internal and External Governance, and Green Innovation: Does the Deterrence Effect Work?" Sustainability 16, no. 16: 6955. https://doi.org/10.3390/su16166955
APA StyleLiu, Y., & Tang, L. (2024). Environmental Penalties, Internal and External Governance, and Green Innovation: Does the Deterrence Effect Work? Sustainability, 16(16), 6955. https://doi.org/10.3390/su16166955