Environmental Ethics Unveiled: Navigating the Nexus Between Government Divestiture and Environmental Investment

ABSTRACT This study examines the impact of government divestiture on corporate environmental investment (EI) and investigates how regional development moderates this relationship. Using a sample of Chinese listed firms from 2012 to 2022, we employ a fixed‐effect model to analyze the data. Our findings reveal a negative effect of government divestiture on EI. Furthermore, we observe that regional development mitigates this negative impact, indicating that firms operating in developed environments are more inclined to prioritize environmental concerns, likely due to increased stakeholder monitoring. To address concerns regarding endogeneity, we utilize propensity score matching (PSM), Heckman tests, and the generalized method of moments (GMM). Overall, our results carry significant policy implications, particularly regarding the environmental consequences of privatization in emerging markets like China.