Do corporate green investments improve environmental performance? Evidence from the perspective of efficiency

By linking green investments to corporate environmental performance from the perspective of efficiency, this paper quantifies and evaluates firm-level green investment efficiency, with SBM-DEA approach and hand-collected emission data of Chinese listed companies in polluting industries. We find that corporate green investment efficiency is overall low, primarily due to excessive green investments, suggesting that managers only invest extensively in environmental dimensions without considering the efficient allocation and value-creating use of limited resources. Further, we conduct the Tobit regression and demonstrate that local environmental enforcement has an inverted U-shaped effect on green investment efficiency of polluting firms. Notably, this effect is only statistically significant in Non-SOEs and small-scale enterprises. Moreover, we document a U-shaped relationship between local environmental enforcement and excessive green investments, and this relationship is also only pronounced in Non-SOEs and small-scale firms. Our findings indicate that local governments should optimize corporate green investment efficiency through differentiated environmental regulation.

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