Exploring the impact of ambient air quality standards on firm innovation: evidence from listed industrial companies in China

This paper aims to identify the impact of the new ambient air quality standards (AAQS) on firm innovation.

Taking listed companies from 2009 to 2014 as the research object, the authors focus on the quasinatural experiment of the pilot policy of the new AAQS and apply the time-varying difference-in-differences (DID) method to conduct the empirical test.

The authors find that the new AAQS has a negative effect on firm innovation, and this negative impact may be caused by the increased environmental expenditures following the implementation of the new AAQS. Furthermore, the authors find that firm profitability and state ownership weaken this negative effect, but the effect of the degree of industrial pollution is statistically insignificant.

The study is an initial effort to explore the causal effect of the new AAQS on firm innovation. This study enriches the literature on the impact of environmental regulations on firm innovation and provides some reference value for the formulation of environmental regulation policies in developing countries.