Skip to main content

Advertisement

SpringerLink
Log in

How does anti-corruption policy affect the sensitivity of green innovation to executive incentives?

  • Published:
Economic Change and Restructuring Aims and scope Submit manuscript

Abstract

Due to the unique contribution it makes to both environmental and financial performances, green innovation has become a key factor driving organizations to achieve sustainable development. Policy change presents a good opportunity to discover the drivers of corporate behavior. Considering the way in which anti-corruption policy can affect firms’ innovation environment and innovation decisions, this research takes China’s anti-corruption policy as a shock condition and conducts a quasi-experiment to discuss the impact of anti-corruption policy on the sensitivity of green innovation to executive incentives in China. The main findings reveal that anti-corruption policy significantly improves the sensitivity of green innovation to equity incentives and decreases the sensitivity to control rights incentives, but does not influence the sensitivity to reputation incentives. These findings show the integrated impact of an exogenous environment and endogenous governance upon green innovation. We also reveal the difference of this integrated impact in the context of various natures of ownership. Specifically, in private enterprises, anti-corruption policy can optimize the sensitivity of green innovation to equity incentives, while in state-owned enterprises the sensitivity of green innovation to reputation incentives combined with equity incentives or with control rights incentives significantly improves. The findings presented in this paper reveal the micro-economic effects of anti-corruption policy on green innovation and instruct firms to optimize executive incentive arrangements to green development under the background of China’s anti-corruption campaign.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1

Similar content being viewed by others

Data Availability Statement

Data are available from the authors upon request.

Notes

  1. Due to space limitations, this paper does not fully report the empirical results.

References

  • Acemoglu D, Johnson S (2005) Unbundling institutions. J Polit Econ 113(5):949–995

    Article  Google Scholar 

  • Aggarwal RK, Samwick AA (2006) Empire-builders and shirkers: investment, firm performance, and managerial incentives. J Corp Finance 12(3):489–515

    Article  Google Scholar 

  • Anderson C, Galinsky AD (2010) Power, optimism, and risk-taking. Eur J Soc Psychol 36(4):511–536

    Article  Google Scholar 

  • Anderson C, Jennifer BL (2003) The experience of power: examining the effects of power on approach and inhibition tendencies. J Personal Soc Psychol 83(6):1362–1377

    Article  Google Scholar 

  • Ang JA, Cole RA, Lin JW (2000) Agency costs and ownership structure. J Finance 55(1):81–106

    Article  Google Scholar 

  • Balcilar M, Gupta R, Lee CC, Olasehinde-Williams G (2020) Insurance and economic policy uncertainty. Res Int Bus Finance 54:101253

    Article  Google Scholar 

  • Beck PJ, Maher MW (1986) A comparison of bribery and bidding in thin markets. Econ Lett 20(1):1–5

    Article  Google Scholar 

  • Cai X, Zhu B, Zhang H, Li L, Xie M (2020) Can direct environmental regulation promote green innovation in heavily polluting industries? Evidence from Chinese listed companies. Sci Total Environ 746:140810

    Article  Google Scholar 

  • Campello M (2006) Debt financing: does it boost or hurt firm performance in product markets? J Financ Econ 82(1):135–172

    Article  Google Scholar 

  • Cao X, Wang Y, Zhou S (2018) Anti-corruption campaigns and corporate information release in China. J Corp Finance 49:186–203

    Article  Google Scholar 

  • Chen S, Sun Z, Tang S, Wu D (2011) Government intervention and investment efficiency: evidence from China. J Corp Finance 17(2):259–271

    Article  Google Scholar 

  • Chen X, Chen G, Lin M, Tang K, Ye B (2021) How does anti-corruption affect enterprise green innovation in China’s energy-intensive industries? Environ Geochem Health 1–24

  • Dai L, Mu X, Lee CC, Liu W (2021) The impact of outward foreign direct investment on green innovation: the threshold effect of environmental regulation. Environ Sci Pollut Res 28:34868–34884

    Article  Google Scholar 

  • Delios A, Beamish PW (1999) Geographic scope, product diversification, and the corporate performance of Japanese firms. Strateg Manag J 20(8):711–727

    Article  Google Scholar 

  • Ellis J, Smith J, White R (2020) Corruption and corporate innovation. J Financial Quant Anal 55(7):2124–2149

    Article  Google Scholar 

  • Fama EF, Jensen MC (1983) Separation of ownership and control. J Law Econ 26(2):301–325

    Article  Google Scholar 

  • Fan JPH, Wong TJ (2002) Corporate ownership structure and the informativeness of accounting earnings in East Asia. J Account Econ 33(3):401–425

    Article  Google Scholar 

  • Fu Y (2019) The value of corporate governance: Evidence from the Chinese anti-corruption campaign. N Am J Econ Finance 47:461–476

    Article  Google Scholar 

  • Garicano L, Lelarge C, Reenen JV (2013) Firm size distortions and the productivity distribution: evidence from France. Am Econ Rev 106(11):3439–3479

    Article  Google Scholar 

  • Guay WR (1999) The sensitivity of CEO wealth to equity risk: an analysis of the magnitude and determinants. J Finance Econ 53(1):43–71

    Article  Google Scholar 

  • Hadlock CJ, Pierce JR (2010) New evidence on measuring financial constraints: moving beyond the KZ index. Rev Financial Stud 23(5):1909–1940

    Article  Google Scholar 

  • Harford J (2002) Takeover bids and target directors’ incentives: the impact of a bid on directors’ wealth and board seats. J Finance Econ 69(1):51–83

    Article  Google Scholar 

  • Hassan ST, Xia E, Lee CC (2021) Mitigation pathways impact of climate change and improving sustainable development: the roles of natural resources, income, and CO2 emission. Energy & Environ 32(2):338–363

    Article  Google Scholar 

  • Hu GQ, Wang XQ, Wang Y (2021) Can the green credit policy stimulate green innovation in heavily polluting enterprises? Evidence from a quasi-natural experiment in China. Energy Econ 98:105134

    Article  Google Scholar 

  • Jayaraman S, Milbourn TT (2014) CEO equity incentives and financial misreporting: the role of auditor expertise. Soc Sci Electron Publ 90(1):321–350

    Google Scholar 

  • Jiang XC, Shen JH, Lee CC, Cheng C (2021) Supply-side structural reform and dynamic capital structure adjustment: evidence from Chinese-listed firms. Pac Basin Finance J 65:101482

    Article  Google Scholar 

  • Karakaya E, Hidalgo A, Nuur C (2014) Diffusion of eco-innovations: a review. Renew Sustain Energy Rev 33:392–399

    Article  Google Scholar 

  • Kemp R (2010) Eco-innovation: definition, measurement and open research issues. Economia Politica 27(3):397–420

    Google Scholar 

  • Krueger AO (1974) The political economy of rent-seeking society. Am Econ Rev 64(3):291–303

    Google Scholar 

  • Lee CC, Chen MP (2021) Ecological footprint, tourism development, and country risk: international evidence. J Clean Prod 279:123671

    Article  Google Scholar 

  • Lee CC, Wang CW, Ho SJ (2020) Country governance, corruption, and the likelihood of firms’ innovation. Econ Model 92:326–338

    Article  Google Scholar 

  • Lee CC, Olasehinde-Williams G, Akadiri SS (2021) Geopolitical risk and tourism: evidence from dynamic heterogeneous panel models. Int J Tour Res 23:26–38

    Article  Google Scholar 

  • Li Y, Zhang Y, Lee CC, Li J (2021) Structural characteristics and determinants of an international green technological collaboration network. J Clean Prod 324:129258

    Article  Google Scholar 

  • Liu TY, Lee CC (2020) Convergence of the world’s energy use. Resour Energy Econ 62:101199

    Article  Google Scholar 

  • Liu M, Lee CC (2022) Is gold a long-run hedge, diversifier, or safe haven for oil? Empirical evidence based on DCC-MIDAS. Resour Policy 76:102703

    Article  Google Scholar 

  • Luo Y (2005) An organizational perspective of corruption. Manag Organ Rev 1(1):119–154

    Article  Google Scholar 

  • Luo Y, Salman M, Lu Z (2021) Heterogeneous impacts of environmental regulations and foreign direct investment on green innovation across different regions in China. Sci Total Environ 759(2):143744

    Article  Google Scholar 

  • Lv C, Shao C, Lee CC (2021) Green technology innovation and financial development: do environmental regulation and innovation output matter? Energy Econ 98:105237

    Article  Google Scholar 

  • Manso G (2011) Motivating innovation. J Finance 66(5):1823–1860

    Article  Google Scholar 

  • Masulis RW, Mobbs S (2014) Independent director incentives: where do talented directors spend their limited time and energy? J Finance Econ 111(2):406–429

    Article  Google Scholar 

  • Mcclelland DC, Burnham DH (1976) Power is the great motivator. Harv Bus Rev 54(2):100–111

    Google Scholar 

  • Monte AD, Papagni E (2007) The determinants of corruption in Italy: regional panel data analysis. Eur J Polit Econ 23(2):379–396

    Article  Google Scholar 

  • Morck R, Yeung B (2005) Corporate governance, economic entrenchment, and growth. J Econ Lit 43(3):655–720

    Article  Google Scholar 

  • Parvez R, Sopariwala (2003) Strategic analysis of operating income: an extension to Horngren, Foster and Datar. J Account Educ 21(1):25–42

    Article  Google Scholar 

  • Paunov C (2016) Corruption’s asymmetric impacts on firm innovation. J Dev Econ 118:216–231

    Article  Google Scholar 

  • Ramus CA, Steger U (2000) The roles of supervisory support behaviors and environmental policy in employee “ecoinitiatives” at leading-edge European companies. Acad Manag J 43(4):605–626

    Article  Google Scholar 

  • Rennings K, Rammer C (2011) The impact of regulation-driven environmental innovation on innovation success and firm performance. Ind Innov 18(3):255–283

    Article  Google Scholar 

  • Schiederig T, Tietze F, Herstatt C (2012) Green innovation in technology and innovation management: an exploratory literature review. R and D Management 42(2):180–192

    Article  Google Scholar 

  • Sharma S (2000) Managerial interpretations and organizational context as predictors of corporate choice of environmental strategy. Acad Manag J 43(4):681–716

    Article  Google Scholar 

  • Shen H, Zhang J, Lee CC, Li W (2020) Toward a theory of internal governance structure of China’s large SOEs. J Asian Econ 70:101236

    Article  Google Scholar 

  • Singh M, Davidson WN (2003) Agency costs, ownership structure and corporate governance mechanisms. J Bank Finance 27(5):793–816

    Article  Google Scholar 

  • Smith PK, Bargh JA (2008) Nonconscious effects of power on basic approach and avoidance tendencies. Soc Cogn 26(1):1–24

    Article  Google Scholar 

  • Tchistyi A, Yermack D, Yun H (2011) Negative hedging: performance-sensitive debt and CEOs’ equity incentives. J Financial Quant Anal 46(3):657–686

    Article  Google Scholar 

  • Tian G (2000) Property rights and the nature of Chinese collective enterprises. J Comp Econ 28(2):260–268

    Article  Google Scholar 

  • Tian N (2017) How do anticorruption measures affect executive incentive? Finance Res Lett 24:179–185

    Article  Google Scholar 

  • Tosi HL, Werner S, Katz JP, Gomez-Mejia LR (2000) How much does performance matter? A meta-analysis of CEO pay studies. J Manag 26(2):301–339

    Google Scholar 

  • Tsao HT, Lu CC, Yeh RS (2015) China’s outward FDI in Africa: enterprises with different ownership types. Contemp Chin Political Econ Strateg Relat Int J 1(2):489–527

    Google Scholar 

  • Uotila J, Maula M, Keil T et al (2009) Exploration, exploitation, and financial performance: Analysis of S&P 500 corporations. Strateg Manag J 30(2):221–231

    Article  Google Scholar 

  • Wang X (2016) Optimal integration strategy of executives’ incentive contracts and technology innovation: an empirical study based on enterprise lifecycle theory. Sci Sci Manag S. and T. 37(9):143–154

  • Wang MB, Kong DM (2016) Anti-corruption and Chinese Corporate Governance: a quasi -natural experiment. J Financial Res 8:159–174

    Google Scholar 

  • Wang Y, You J (2012) Corruption and firm growth: evidence from China. China Econ Rev 23(2):415–433

    Article  Google Scholar 

  • Wen H, Lee CC, Zhou F (2021) Green credit policy, credit allocation efficiency and upgrade of energy-intensive enterprises. Energy Econ 94:105099

    Article  Google Scholar 

  • Wen H, Chen S, Lee CC (2022) Impact of low-carbon city construction on financing, investment, and total factor productivity of energy-intensive enterprises. Energy J 44(2):51–74

    Google Scholar 

  • Wu Y, Lee CC, Lee CC, Peng D (2022) Geographic proximity and corporate investment efficiency: evidence from high-speed rail construction in China. J Bank Finance 140:106510

    Article  Google Scholar 

  • Xu G, Yano G (2017) How does anti-corruption affect corporate innovation? Evidence from recent anti-corruption efforts in China. J Comp Econ 45(3):498–519

    Article  Google Scholar 

  • Xu P, Zhang H, Bai G (2019) Research on the differentiated impact mechanism of parent company shareholding and managerial ownership on subsidiary responsive innovation: empirical analysis based on “Principal–Agent” framework. Sustainability 11(19):1–17

    Article  Google Scholar 

  • Xu L, Fan M, Yang L, Shao S (2021) Heterogeneous green innovations and carbon emission performance: evidence at China’s city level. Energy Econ 99:105269

    Article  Google Scholar 

  • Zang Z, Zhu Q, Mogorrón-Guerrero H (2019) How does R&D investment affect the financial performance of cultural and creative enterprises? The moderating effect of actual controller. Sustainability 11(2):297

    Article  Google Scholar 

  • Zhang J (2018) Public governance and corporate fraud: evidence from the recent anti-corruption campaign in China. J Bus Ethics 148(2):375–396

    Article  Google Scholar 

Download references

Acknowledgements

We would like to thank the editor and the anonymous referees for their highly constructive suggestions.

Funding

Chien-Chiang Lee is grateful to the Social Science Foundation of Jiangxi Province of China for financial support through Grant No: 21JL02.

Author information

Authors and Affiliations

  1. School of Business Administration, Shandong University of Finance and Economics, Jinan, China

    Xu Wang

  2. School of Management, Xiamen University, Xiamen, China

    Xu Chu

  3. School of Economics and Management, Nanchang University, Nanchang, China

    Chien-Chiang Lee

Authors
  1. Xu Wang
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Xu Chu
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Chien-Chiang Lee
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Chien-Chiang Lee.

Ethics declarations

Conflict of interest

All authors declare that they have no conflict of interest.

Ethical approval

This article does not contain any studies with human participants or animals performed by any of the authors.

Additional information

Publisher's Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Wang, X., Chu, X. & Lee, CC. How does anti-corruption policy affect the sensitivity of green innovation to executive incentives?. Econ Change Restruct 56, 79–109 (2023). https://doi.org/10.1007/s10644-022-09413-4

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10644-022-09413-4

Keywords

Search

Navigation