Natural resources and assets accountability audit of local officials and government subsidies: evidence from China

ABSTRACT

In 2014, the Chinese central government required implementing natural resource and asset accountability audit for local officials to promote environmental governance. From the perspective of government subsidy allocation, this paper examines whether and how the new government audit policy influences the strategy of local governments to high-polluting firms. We adopt a multi-period difference-in-difference research design and find that after the policy implementation, local officials pay more attention to local ecological performance, thus, reducing the government subsidies to high-polluting enterprises. They also reduce support for high-polluting by reducing tax incentives. These findings document that the implementation of government audit policy weakens the collusion between local officials and high-polluting firms, which enriches the intercross investigation between government audit and environmental governance.

KEYWORDS:

• Natural resources and assets accountability audit
• environmental management
• government subsidies
• tax

JEL CLASSIFICATION:

• D73
• H23

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

This work was supported by the National Natural Science Foundation of China for Young Scientists [71902098]; Social Science Planning Project of Shandong Province for Young Scholars [20DGLJ07]; Key program of national social science foundation of China [Grant number: 20AGL010]; General program of national nature science foundation of China [Grant number: 71672119].