Can Environmental Regulation Result in Environmental and Economic Improvements? Evidence From the Sugar Industry Under China's Mandatory Environmental Information Disclosure Policy

ABSTRACT Environmental information disclosure (EID) policies have been used in many jurisdictions, yet the impact on the environment and economic performance of enterprises remains a question. This study examines China's mandatory EID policy implemented in 2014 as an example of the potential relationship between environmental policy and enterprise performance. We applied a difference‐in‐differences (DID) and propensity score matching (PSM) sampling method to examine the issue, using a panel dataset of nearly 90 sugar enterprises in Guangxi in China from 2008 to 2016. Earnings before income and tax and pollution emissions are considered as proxies of economic and environmental performance, respectively. The results show that the 2014 MEID policy has a significantly positive effect on pollution reduction and a significantly adverse effect on economy. These effects vary with corporation size and ownership. Production shrinkage appears to be the main reason for pollution reduction in Guangxi's sugar industry rather than technological innovation in the pollution treatment process. Furthermore, we discuss the study's limitations and policy implications.