Public Pension Policy and Corporate Environmental Performance: Evidence From China

ABSTRACT This paper examines how China's 2019 public pension reform, which reduced firms' contribution burdens, affects corporate environmental performance. We find that firms significantly improved their environmental engagement following the reform. The increase is not driven by the COVID‐19 pandemic and is more pronounced among firms with greater contribution reductions, fewer growth opportunities, lower financial constraints, or better governance. The enhanced efforts are reflected in increased green innovation, improved local air quality, and higher firm value, supporting the hypothesis that reduced labour costs free up resources so that firms could enhance their environmental engagement.