Environmental Regulation, Corporate Economic Performance and Spatial Technology Spillover: Evidence from China’s Heavily Polluting Listed Corporations

Abstract

The relationship between environmental regulation, technology spillover, and economic performance has been the subject of intense scholarly debate in environmental economics for many years. The famous Porter hypothesis states that environmental regulation promotes both the economic performance and the environmental performance of corporations. However, the existing literature has paid relatively little attention to micro-level research and spatial spillover effects. This article endeavors to fill this gap by an empirical analysis of a sample of 900 of China’s heavily polluting listed corporations for the period of 2013–2016. By utilizing spatial econometric methods to measure spatial direct and indirect effects and decomposing total factor productivity change into technical change, pure efficiency change, and scale efficiency change, we find that environmental regulation promotes corporate total factor productivity but widens the disparity between profitable and unprofitable corporations. Our results also suggest that the direct and indirect effects of environmental regulation and corporate profitability on promoting total factor productivity rely heavily on the efficiency changes, while the contribution of the key component, technical change, is insig-nificant.