Environmental regulations and outward foreign direct investment-empirical evidence from Chinese enterprises

In the context of the new economic normal, environmental protection and economic growth have become the focus of academic attention. This paper explores the effect and impact mechanism of environmental regulations on the outward foreign direct investment (OFDI) of enterprises by using data from the China Industrial Enterprise Database and the Directory of Overseas Investment Enterprises (Institutions) for the years 2004 to 2010. The findings are summarised as follows. Firstly, environmental regulations have a significant positive effect on the OFDI of Chinese enterprises, and this result remains robust after considering the outcomes of robustness tests and endogeneity issues. Secondly, the promotion effect of environmental regulations on the OFDI of Chinese enterprises obviously differs across investment motivations and industry characteristics. Thirdly, productivity gains are important channels through which environmental regulations promote the OFDI of enterprises. These findings have great significance for the effective formulation of environmental regulatory policies and the stable development of the OFDI of Chinese enterprises.