This study investigates whether common auditors have an impact on firms’ green innovation. Using a sample of Chinese listed firms, we find the common auditor ties to firms with green patents are positively related to focal firms’ green innovation. When examining underlying mechanisms behind such effects, we observe that our main findings are more profound for focal firms with more opaque information, communicating with auditors intensively and audited by senior auditors, which indicates information sharing serves as the plausible mechanism. Cross-sectionally, our findings are more remarkable for non-SOEs, firms with lower financial constraints, firms located in regions with environmental courts, local auditors, auditors with green auditing abilities and firms in the same industry. Further analysis suggests that the common auditor ties to firms with green patents can further improve focal firms’ environmental performance and green patent citations, which in turn boosts market share of involved audit firms. Overall, we document that common auditors have a positive spillover regarding green innovation to connected clients through transferring valuable green expertise in a legitimate way.

Exploiting the unexpected Central Environmental Inspections (CEI) in China as a quasinaturalexperiment, we find that public firms in polluting industries experience significant gains in both profitability and market valuation after the regulatory shock, relative to firms in nonpolluting industries. The outperformance of public firms can be explained by the retreat of their private competitors, many shut down due to poor environmental performance. Because firms seeking public listing are required to meet high environmental standards, CEI significantly strengthen public firms’ competitive position, leading to increased sales growth and market share. Moreover, the outperformance is more pronounced for firms with more eco-friendly technologies, consistent with strict environmental regulations increasing the marginal benefit of these technologies. We provide novel evidence of the bright side of environmental regulation by highlighting the importance of industry dynamics.

We investigate whether and how environmentally inclined politicians (EIPs), i.e., politicians with prior environment-related work experience, affect local environmental performance in China. We find that firms located in cities with EIPs have lower levels of sulfur dioxide (SO2) emissions. The effect is attenuated when the politician is in his/her second term and among firms that are economically important. Firms in cities with EIPs commit fewer environmental violations, receive more green subsidies from the local government, and choose to establish new polluting subsidiaries in cities without EIPs. We also find that the economic performance of cities governed by EIPs is not statistically different from that of cities governed by non-EIPs. Furthermore, the promotion likelihood of EIPs is negatively related to local emission levels. The findings overall suggest that local officials strategically leverage their expertise in environment protection to allocate more effort on environmental causes.

The growth of digital economy and sustainable development of environment are important issues related to high-quality economic development in the new era. This paper selects the yearly data of China from 2007 to 2021, constructs the China’s Environmental Performance Index, and establishes the TVP-VAR model to investigate the dynamic time-varying relationship between digital economy growth, CO2 emissions, and sustainable development of environment in short, medium and long-term. The results show that the relationships among them are time-varying at all terms. Specifically, in first, the growth of the digital economy exerts a negative impulse on CO2 emissions, and the short-term effect is greater than the long-term effect. Secondly, there exist positive impulses between the growth of the digital economy and sustainable development of environment. And CO2 emissions has a negative impact on sustainable development of environment. Thirdly, they have same influencing tendencies at certain time points, but different impact degrees. The impact of the digital economy development on environmental sustainable development has significantly increased since the COVID-19 outbreak. Therefore, the development of digital economy can effectively reduce CO2 emissions and promote the sustainable development of the environment.