Regulatory Centralization and Corporate Green Innovation: Evidence from Personnel Authority Reform in China

62 Pages Posted: 8 Jan 2025

See all articles by Dongmin Kong

Dongmin Kong

School of Economics, Huazhong University of Science and Technology

Ling Zhu

Huazhong University of Science and Technology

Chenhao Liu

Peking University - Guanghua School of Management

Abstract

This study links the institutional changes of personnel appointment authority in regulatory agencies with corporate green innovation. Our difference-in-differences design leverage staggered turnovers of local Environmental Protection Bureaus directors appointed under centralized institution as a plausible exogenous shock. The findings reveal that environmental authority centralization increased corporate green innovation by 4.3% and improve firm sustainability of green innovation by 33.3%. Three key mechanisms driving this green innovation are identified: (1) encouraging firms to allocate R&D resources to support green innovation and enhancing the productivity of specialized green inventors; (2) promoting firm efforts in environmental investments and governance projects; and (3) strengthening incentives for obtaining green subsidies and complying with regulatory standards. Additionally, female directors of centralized environmental authority and those with party-related education backgrounds are more effective in improving corporate green innovation efforts, while directors with local government ties or violation histories are less effective. This research highlights the role of institution in shaping corporate green innovation and offers valuable insights for policymakers and managers aiming to advance green development.

Keywords: Green Innovations, Regulatory Centralization, Personnel Authority Reform, China

Suggested Citation

Kong, Dongmin and Zhu, Ling and Liu, Chenhao, Regulatory Centralization and Corporate Green Innovation: Evidence from Personnel Authority Reform in China. Available at SSRN: https://ssrn.com/abstract=5087511 or http://dx.doi.org/10.2139/ssrn.5087511

Dongmin Kong (Contact Author)

School of Economics, Huazhong University of Science and Technology ( email )

Bldg. of Econ. School, Louyu Rd. 1037#
HUST, Hongshan Dist.
Wuhan, Hubei 430074
China

Ling Zhu

Huazhong University of Science and Technology ( email )

1037 Luoyu Road
Wuhan, Hubei 430074
China

Chenhao Liu

Peking University - Guanghua School of Management ( email )

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