Tightening of environmental regulations and corporate environmental irresponsibility: a quasi-natural experiment

The impact of environmental regulation on corporate environmental responsibility (CER) has been a concern among academicians and practitioners. However, the relationship between environmental regulation and corporate environmental irresponsibility (CEIR) has rarely been reported. Using the difference-in-differences (DID) method, this study empirically examines the effect of China's new Environmental Protection Law (NEPL) on CEIR. Empirical results indicate the following: (1) The NEPL has enhanced the intensity of environmental regulation and significantly inhibited the environmentally irresponsible behaviors of heavy-polluting enterprises. After several robustness tests and endogenous control, the aforementioned inhibitory effect is still present; (2) the inhibitory effect of the NEPL on CEIR is more apparent in state-owned enterprises, low-marketization areas, and industries with high pollution intensity; (3) the mechanism test shows that the NEPL restrains CEIR by encouraging heavy-polluting enterprises to increase their environmental investment. Providing unique evidence in the eastern cultural context, this study not only expands the research perspective of avoiding CEIR from the point of view of environmental regulation but also enriches the research literature on the emerging policy and business management.