Effects of environmental regulation and corporate environmental commitment: Complementary or alternative? Evidence from China

Firms have a crucial role to play in driving the process of greenization, yet there exists a dearth of studies that have comprehensively examined the combined influence of external environmental regulation and corporate environmental commitment on corporate greenization. In this study, utilizing a database comprising Chinese firms listed on the Shenzhen and Shanghai Stock Exchanges between 2011 and 2019, an empirical analysis is conducted to investigate the effects of external environmental regulation, corporate environmental commitment, and their interaction on corporate greenization. Textual analysis is employed to quantitatively evaluate the extent of these two variables. The findings reveal that external environmental regulation exerts a positive impact on both corporate greenization input and output, whereas corporate environmental commitment only significantly enhances the output. Moreover, notable substitution effects are discovered between external environmental regulation and corporate environmental commitments concerning the greenization output. Further heterogeneity analysis uncovers that such substitution effects are predominantly observable in non-state-owned firms and those with relatively lower levels of pollution. These empirical outcomes provide valuable theoretical support for both the Chinese government and firms alike to advance and promote the progress of greenization.