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ADMINISTRATIVE REFORM AND ENVIRONMENTAL PROTECTION: THE CASE OF CHINA

Published online by Cambridge University Press:  04 April 2019

Guangdong Xu Open the ORCID record for Guangdong Xu [Opens in a new window] ,
Wenming Xu  and
Binwei Gui
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Abstract

China's economic miracle has been achieved at considerable environmental cost. To fight against environmental pollution more effectively, the Chinese government established the Ministry of Environmental Protection (MEP) in 2008. This study investigates the stock market reaction to this event and finds that, on average, listed firms in polluting industries experienced a statistically and economically significant negative abnormal return on the event date, which implies that the compliance costs of these polluting firms are expected to increase. In addition, this study finds that enterprises with different ownership styles and different political influence experienced different price reactions during the event window. More specifically, state-owned enterprises (SOEs) in general experienced a less negative abnormal return over different event windows, and provincial SOEs perform much better than central SOEs and sub-provincial SOEs.

Keywords

administrative reformenvironmental protectionstock market reactionSOEs
Type
Article
Information
Journal of East Asian Studies , Volume 19 , Issue 1 , March 2019 , pp. 39 - 59
Copyright
Copyright © East Asia Institute 2019 

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