Criminal enforcement and environmental performance: Evidence from China

The past decade has witnessed an escalation of using criminal enforcement to enhance environmental compliance in China. The purpose of this study is to examine the deterrent effects of criminal enforcement on environmental crimes. To this end, we explore a unique environmental supervision and compliance dataset of Chinese facilities. Our empirical analysis shows that criminal enforcement significantly enhances firms' environmental performance. The preferred specifications suggest that presence of criminal charges in a city is associated with a 12% reduction in the number of environmental violations. This result is robust to different specifications and alternative measures. Our findings further show that the deterrent effect is more pronounced in inland cities and those “non-key” environmental protection cities. It suggests that criminal enforcement has significant complementary effects in enhancing compliance in areas where administrative enforcement is insufficient.