Can environmental regulation promote green innovation in heavily polluting enterprises? Empirical evidence from a quasi-natural experiment in China

The impact of environmental regulation on enterprise green innovation has not yet formed a unified conclusion. Based on the sample data of Shanghai and Shenzhen A-share listed companies from 2010 to 2019, this paper takes the promulgation of the new Environmental Protection Law (NEPL) in 2014 as the exogenous shock of a quasi-natural experiment, and applies the propensity score matching and difference-in-difference (PSM-DID) model to test the influence of environmental regulation on enterprise green innovation. On this basis, we further analyze the heterogeneity according to the different nature of corporate equity and probe the mechanism of environmental responsibility and government subsidies in the impact of environmental regulation on green innovation. The results indicate that: first, the NEPL has significantly promoted the green innovation of heavily polluting enterprises, and the marginal effects of NEPL exhibit a fluctuating trend of "first decline, then rise and then decline" over time, and the overall trend is downward. Second, compared with non-state-owned enterprises, the NEPL plays a more significant role in promoting the green innovation of state-owned enterprises. Third, the environmental responsibility plays a mediating role in the impact of environmental regulation on enterprise green innovation. Government subsidies play a positive moderating role in the impact of environmental regulation on enterprise green innovation. This study not only provides empirical evidence for the "Porter Hypothesis", but also enriches the research on the effect evaluation of environmental regulation policies, and also furnishes a reference for the construction of the green innovation system of enterprises.