A Study of the Environmental Governance Effects of Officials’ Inspections: A Dual Mechanism Test of Pressure and Capacity

In order to get a sense of the local economy and understand the implementation of policies, official visits and inspections in enterprises have become a norm for officials to perform administrative functions and participate in economic decision-making. Therefore, does official inspections affect corporate environmental governance behavior? Using the data from the 12th China Private Enterprise Survey (CPES) in 2016, this paper empirically analyzes the effect and mechanism of official inspections on the environmental governance of private enterprises. The study finds that official inspections have a significant role in promoting corporate environmental governance, increasing the level of investment in environmental governance of private enterprises, and after using a series of methods, the conclusions are still robust. In addition, the research on the mechanism finds that official inspections strengthen the pressure of corporate environmental regulations, improve the convenience of formal financing, and obtain market development opportunities to promote investment in corporate environmental governance. Further analysis finds that the lower the degree of regional marketization, the greater the degree of corporate financing constraints, and the lower the pressure on environmental profit and loss, the stronger the effect of official visits in promoting corporate environmental governance. The research not only enriches the related research on political connections and corporate environmental governance, but also elaborates the micro-mechanisms of official inspections that affect corporate environmental governance from the perspective of the “combination of blocking and plugging” policy, which have an important implications for the government to formulate environmental regulatory policies and encourage private firms to invest in environmental governance.