How does urban environmental legislation guide the green transition of enterprises? Based on the perspective of enterprises' green total factor productivity

This paper uses a dynamic slack-based measure (DSBM) model to calculate an enterprise's green total factor productivity (GTFP), used as the proxy variable for measuring the enterprise's green transition. We use urban environmental legislation as a quasi-natural experiment and introduce it into a partial equilibrium analysis framework for heterogeneous enterprises and theoretically reveal the mechanism in how urban environmental legislation affects enterprises' GTFP. The results show that implementing urban environmental legislation can significantly improve the GTFP of enterprises. This conclusion remains robust to multiple scenarios. Our heterogeneity analyses show that urban environmental legislation has a relatively significant impact on non–state-owned enterprises, enterprises with low financing constraints, enterprises located in Two Control Zones and Central Plains Urban Agglomeration. Compared with the ex-post-facto treatment of pollutants through abatement, encouraging enterprises to increase investment in prevention is more conducive to improving enterprise GTFP. Further inspection shows that environmental legislation on the prevention of water, air, and solid waste pollutants has a greater impact on enterprise GTFP. In addition, this paper uses a simhash algorithm to quantify the 662 laws, finding that the improvement effect on enterprise GTFP is more significant with increasing intensity in urban environmental legislation. • Introducing urban environmental legislation into a partial equilibrium analysis framework for heterogeneous enterprises. • Calculating enterprises' GTFP from 2001 to 2012 based on a dynamic slack-based measure (DSBM) model. • Using a quantitative analysis of the laws and constructing an intensity index of urban environmental legislation. • Investigate the impact of the heterogeneity of urban legislation types and legislation intensity on enterprise GTFP. • Compared with ex-post treatment, encouraging enterprises to increase investment in prevention is more conducive.