Impact of environmental justice specialization on corporate green transformation and its mechanisms.

Strengthening the rule of law in the ecological environment is a long-term mechanism to promote comprehensive green transformation in economic and social development. Environmental courts, as an institutional innovation in the specialization of environmental justice, aim to improve the efficiency of environmental justice and the quality of environmental governance. However, few studies have paid attention to the impact of environmental justice reform on corporate green transformation. In view of this and considering the establishment of environmental courts by China's local intermediate people's courts as a quasi-natural experiment, this paper examined the impact of environmental judicial specialization on corporate green transformation and its mechanisms using a multi-period DID model based on the data of China's A-share listed companies from 2004 to 2020. The results showed that: (1) The establishment of environmental courts had a significant positive impact on corporate green transformation, as evidenced by the promotion of green innovation and an increase in total factor productivity. This conclusion still held after a series of robustness tests. (2) The mechanism analysis showed that the establishment of the environmental court promoted corporate green transformation through strengthening external constraints and improving the internal dynamics of enterprises. Specifically, the external constraint mechanism included weakening the governance failure caused by the collusion between the government and enterprises, as well as enhancing the soft constraints imposed by the public. The internal dynamic mechanism included reducing the financing pressure and improving the innovation efficiency faced by enterprises in the progress of green transformation. (3) Heterogeneity analysis found that the green transformation effect of environmental courts had a more significant positive effect on polluting industries, private firms, and firms with CEOs with environmental backgrounds. This study showed that the positive impact of environmental justice specialization on corporate green transformation was sustainable and would not squeeze out green innovation activities because of the potential transformation costs, exploring an incentive-compatible legal path for corporate green transformation. Therefore, it is necessary to deepen the reform of environmental justice specialization, strengthen cross-basin and cross-regional environmental justice linkages, explore collaboration models among judicial, administrative, and social organizations, and improve the comprehensive governance mechanism that coordinates external constraints with internal dynamics, so as to stimulate the endogenous motivations of the whole society to build, share, and govern the ecological environment while maintaining normalized external pressure. [ABSTRACT FROM AUTHOR]