How mayors’ promotion incentives shape corporate green innovation disclosure? Evidence from China’s New Environmental Protection Law

Abstract

We investigate the impact of mayors’ promotion incentives on corporate green innovation disclosures following China’s implementation of the New Environmental Protection Law (NEPL) in 2015. The NEPL signaled a nationwide escalation in environmental regulations. Although firms governed by high-promotion-incentivized mayors disclosed fewer green innovations than firms governed by low-promotion-incentivized mayors, they increased their green innovation disclosures more significantly after the NEPL implementation. Our results capture the dynamics of corporate green innovation disclosure around NEPL implementation by measuring firm green innovation disclosure using neural network-based machine-learning techniques. Furthermore, this improvement in green innovation disclosure is more pronounced for firms in pollution-heavy industries, firms with political ties, and those facing high litigation risks. Lastly, environmental media coverage and investigation mechanisms amplify the positive effect of mayors’ promotion incentives on green innovation disclosures. Our study highlights the age factor in local politicians’ promotion incentives for corporate green innovation disclosure.