New "Environmental Protection Law" and Enterprise Technological Innovation

The revised Environmental Protection Law, effective January 1, 2015, was enacted to drive sustainable economic growth and facilitate the green transformation of heavily polluting enterprises. This study examines the law's impact on technological innovation within these enterprises and explores the underlying mechanisms. Using data from companies listed on the Shanghai and Shenzhen A-share markets between 2012 and 2019, a difference-in-differences (DID) model is employed to test the hypotheses. Findings show that the law significantly boosts the innovation capabilities of heavily polluting enterprises, with the most substantial effects observed in eastern regions, older companies, those with lower market concentration, and higher corporate governance levels. Further analysis reveals that the new Law compels heavily polluting enterprises to pursue technological innovation primarily by increasing financing constraints.