Government's awareness of Environmental protection and corporate green innovation: A natural experiment from the new environmental protection law in China

Based on the impact of the new environmental protection law promulgated by the Chinese government in 2015, we employ the difference-in-differences (DID) approach to investigate the impact of government environmental regulation on corporate green innovation. The evidence shows that government environmental regulation can significantly increase the number of green patents of heavily polluting industries. This result holds after a series of robustness tests. The analysis of the economic mechanism indicates that the new environmental protection law brings supervision pressure to heavily polluting firms, prompting them to improve the quality of information disclosure, thus improving green innovation. In addition, the regional economic development level, government subsidies, and public supervision can significantly affect the positive impact of the new environmental protection law. Meanwhile, the effect is more prominent in non-stateowned enterprises and in firms with small scale, low profitability, and weak internal governance. (C) 2021 Economic Society of Australia, Queensland. Published by Elsevier B.V. All rights reserved.

Automated summary

The new environmental protection law has a significant impact on corporate green innovation in heavily polluting industries, increasing the number of green patents. Regulatory pressure prompts firms to improve information disclosure, thus promoting green innovation. The regional economic development level, government subsidies, and public supervision can affect the positive impact of the law.