Assessing the Influence of China's Pre-IPO Environmental Inspection Policy on Firm Environmental Performance and Green Securities

Abstract

With sometimes contradictory outcomes, China has tried various regulations to encourage businesses to improve their environmental performance. This study examines the efficacy of merging two distinct policies at the same time new regulations governing the public disclosure of policy compliance for companies wishing to conduct an initial public offering (IPO) and a more centralized environmental inspection procedure. According to a theoretical paradigm, a firm's environmental performance and profitability should be enhanced by a more centralized inspection and public disclosure. Although the beneficial impact on profitability only lasts for two years after compliance with the IPO criteria, the findings of instrumental variable calculations for 536 listed Chinese enterprises from 2009 to 2019 corroborate the theoretical expectations. A study of potential processes reveals that the joint strategy increases demand for the company's goods while encouraging investment in environmentally friendly initiatives. The results show that more sophisticated regulations could be required if a nation wants to influence business conduct in a way compatible with resolving environmental issues.