Social Insurance Burden and Corporate Environmental Performance: Evidence from China

Appropriate social insurance contribution rates are crucial for the green development of firms. While the existing literature lacks an exploration of the relationship between social insurance policy and corporate environmental performance, this paper empirically examines the impact of social insurance contributions on corporate environmental performance using unbalanced panel data of 2947 A-share listed firms in China from 2008 to 2019. Our study shows that there is an inverted-U-shaped relationship between the social insurance burden and firms' environmental performance, and the result remains robust after changing the measurements of core variables, replacing estimation method, and controlling endogenous problems. The inverted-U-shaped relationship is more pronounced in non-heavily polluting industries, non-labor-intensive industries, and non-state-owned enterprises (non-SOEs). In addition, corporate innovation and digital transformation can positively moderate the inverted-U-shaped effect of social insurance burden on corporate environmental performance, and firms should grasp the "double-edged sword" effect of innovation and digital transformation in different periods of social insurance burden. Further analysis reveals that a reasonable social insurance burden can enhance firm value and risk taking through improving firms' environmental performance, whereas an excessive social insurance burden is not conducive to the improvement of firms' environmental performance, internal value creation, and risk taking.