Air Pollution, Regulatory Reforms, and Impacts on Corporate Policies: Selective Review with Recent Evidence from China

Abstract

We review the new approaches of managing air pollution and the impact of air pollution on corporate activities in China. The Chinese government’s new approaches, such as ecological conservation redline, specialized environmental courts, environmental inspector program, and air pollution tournament, appear to be effective. Several studies suggest that local governments and firms engage in more environmental investments after these regulatory reforms. In terms of corporate activities, we report that air pollution matters. Specially, air pollution has adverse effect on firm activities such as innovation, cash management, among others. Therefore, managing air pollution (or perhaps all pollution) requires innovation approaches and it is not just good for the environment. In most cases, it brings good outcomes (for shareholders).

keywords:

• Environmental regulations
• enforcement
• new approaches
• corporate impact