Does Environmental Protection Law Bring about Greenwashing? Evidence from Heavy-Polluting Firms in China
Round 1
Reviewer 1 Report
Comments and Suggestions for AuthorsDear Authors,
I’ve examined your manuscript with attention. Indeed, this is a very promising study with a clear research question and strong methodology. Its international importance is indisputable, and the relation to the sustainability issues is evident. Principally, the manuscript is well-suitable to “Sustainability”. However, it needs various amendments, restructuring, and substantial additions. The methodology needs better explanation, the interpretations are missed, and the general research context is demonstrated insufficiently. The manuscript should be more informative and better referenced. I hope my recommendations will help you to bring this work in order.
1) Key words: please, avoid the words already used in the title.
2) Introduction: please, start with the explanation of the general importance of environmental law to diminish pollution in the light of the international research experience. The existing literature is really numerous! – So, you can find many works to cite.
3) Lines 54-55: please, support this statement with citations. I also recommend to check the literature, because there were studies, which argued the opposite, i.e., the importance of environmental regulations for better firms’ performance.
4) Lines 90-94: I do not insist, but this paragraph seems to be unnecessary.
5) Section 2 is informative, but it requires citing more articles published in the 2020s in top international journals.
6) Subsection 3.1: please, either cite your data sources or indicate URL for them.
7) Section 3: I see a lot of statistics in the following section. So, you have to provide the related notions in the methodological part of your work and indicate the software used for the calculations. Moreover, I strongly recommend to check “Results” – each point there should have correspondence in the methodological section. For instance, what is the placebo test? – You must explain the related methodology!
8) Section 4 to be named simply “Results”.
9) Section 5 seems to be a part of “Results”!
10) Where is the section “Discussion” that must exist after “Results”. There, you have to provide the interpretations of your findings. What do they mean? Why the situation is so as registered? What are the possible implications? This section can be rather lengthy!
11) Conclusions: I recommend you to include the numbered list of the main findings (2-3 from “Results” and 2-3 from “Discussion”).
12) References: too short! (see also recommendations for the literature additions given above).
Comments on the Quality of English LanguageTo me, the text is clear, but some linguistic polishing would benefit it.
Anyway, the Authors have to focus first on the content-related issues.
Author Response
Thank you for your letter and for the reviewers’ comments concerning our manuscript entitled “Does Environmental Protection Law bring about greenwashing? Evidence from heavy-polluting firms in China” (ID: 2884489). Your comments are all valuable and very helpful for revising and improving our paper, as well as the important guiding significance to our researches. We have studied comments carefully and have made correction which we hope meet with approval. Revised portion are marked in red in the paper. The main corrections in the paper and the responds to the comments are as following:
1) Key words: please, avoid the words already used in the title.
Response: Key words have been updated to: government subsidy; slack resources; institution theory; resource dependence theory; re-source-based view.
2) Introduction: please, start with the explanation of the general importance of environmental law to diminish pollution in the light of the international research experience. The existing literature is really numerous! – So, you can find many works to cite.
Response: We have introduced some researches related to environmental law and pollutant emission in the first paragraph lines 34-40.
3) Lines 54-55: please, support this statement with citations. I also recommend to check the literature, because there were studies, which argued the opposite, i.e., the importance of environmental regulations for better firms’ performance.
Response: We have cited papers supporting this statement (line 59-60). These two different perspectives mainly stem from support for different hypotheses. Supporters of the Porter Hypothesis believe that environmental regulation will improve productivity and thereby enhance firm performance, while proponents of the Costly Regulation Hypothesis argue that environmental regulation will increase compliance costs for firms, thereby reducing performance. In the manuscript, we take the perspective from supporters of the Costly Regulation Hypothesis, and therefore cite literature that suggests that environmental regulation leads to negative performance. The references we cite are as below.
- Wang, Q.; Xu, X.; Liang, K. The Impact of Environmental Regulation on Firm Performance: Evidence from the Chinese Cement Industry. Journal of Environmental Management 2021, 299, 113596, doi:10.1016/j.jenvman.2021.113596.
- Wang, C.; Lin, Y. Does Bargaining Power Mitigate the Relationship between Environmental Regulation and Firm Performance? Evidence from China. Journal of Cleaner Production 2022, 331, 129859, doi:10.1016/j.jclepro.2021.129859.
4) Lines 90-94: I do not insist, but this paragraph seems to be unnecessary.
Response: Thank you for your advice. This paragraph has been deleted.
5) Section 2 is informative, but it requires citing more articles published in the 2020s in top international journals.
Response: We have added 10 related literatures in section 2, which are listed below.
[1] Peng, L.; Li, Y.; van Essen, M.; Peng, M.W. Institutions, Resources, and Strategic Orientations: A Meta-Analysis. Asia Pac J Manag 2020, 37, 499–529, doi:10.1007/s10490-018-09642-0. (line 104, [29])
[2] Ding, D.; Liu, B.; Chang, M. Carbon Emissions and TCFD Aligned Climate-Related Information Disclosures. J Bus Ethics 2023, 182, 967–1001, doi:10.1007/s10551-022-05292-x. (line 110, [33])
[3] Kong, D.; Liu, J.; Wang, Y.; Zhu, L. Employee Stock Ownership Plans and Corporate Environmental Engagement. J Bus Ethics 2024, 189, 177–199, doi:10.1007/s10551-023-05334-y. (line 111, [35])
[4] Li, F.; Lu, X.; Wang, J. Corporate Social Responsibility and Goodwill Impairment: Evidence from Charitable Donations of Chinese Listed Companies; 2023; (line 113, [37])
[5] Pope, S.; Peillex, J.; El Ouadghiri, I.; Gomes, M. Floodlight or Spotlight? Public Attention and the Selective Disclosure of Environmental Information. Journal of Management Studies 2024, doi:10.1111/joms.12920. (line 113, [38])
[6] Kleine, M.; Heite, J.; Huber, L.R. Subsidized R&D Collaboration: The Causal Effect of Innovation Vouchers on Innovation Outcomes. Research Policy 2022, 51, 104515, doi:10.1016/j.respol.2022.104515. (line 133, [42])
[7] Mulier, K.; Samarin, I. Sector Heterogeneity and Dynamic Effects of Innovation Subsidies: Evidence from Horizon 2020. Research Policy 2021, 50, 104346, doi:10.1016/j.respol.2021.104346. (line 133, [43])
[8] Chen, J.; Lu, Q.; Heng, C.S.; Tan, B.C.Y. The Signaling Effect of Entrepreneurship Subsidies on Initial Public Offering Investor Valuation: An Anticorruption Campaign as a Quasi-Natural Experiment. Strategic Entrepreneurship Journal 2023, 17, 633–670, doi:10.1002/sej.1460. (line 125, [45])
[9] Donnelly, R.; Purkayastha, S.; Manolova, T.S.; Edelman, L.F. Institutional Distance, Slack Resources, and Foreign Market Entry. J Int Bus Stud 2023, doi:10.1057/s41267-023-00647-6. (line 160, [52])
[10] Modi, S.B.; Cantor, D.E. How Coopetition Influences Environmental Performance: Role of Financial Slack, Leverage, and Leanness. Production and Operations Management 2021, 30, 2046–2068, doi:10.1111/poms.13344. (line 164, [54])
6) Subsection 3.1: please, either cite your data sources or indicate URL for them.
Response: There are 3 databases used in this research, and all URLs are indicated in the manuscript (lines 179, 185-186, 188).
China Stock Market and Accounting Research Database: https://data.csmar.com/
ESG score in Bloomberg database: https://www.bloombergchina.com/global-environmental-social-governance-data/
ESG score in Sino-Securities Index Information Service: https://www.chindices.com/esg-data.html
7) Section 3: I see a lot of statistics in the following section. So, you have to provide the related notions in the methodological part of your work and indicate the software used for the calculations. Moreover, I strongly recommend to check “Results” – each point there should have correspondence in the methodological section. For instance, what is the placebo test? – You must explain the related methodology!
Response:
- a) We have added section 3.3.2.-3.3.4. to illustrate the methodology of parallel trend test, placebo test, and expectation effect test. The method of PSM-DID is simply explained (line 310) in the results section 4.2.2, because there is just more 1:1 matching of control variables compared to the baseline regression and the method is not enough to form a section. Similarly, 4.2.4.-1 “shorten time window” also uses the baseline regression model, but with fewer samples for regression (line 331). Moderate effect tests and heterogeneity analyses are regressed with baseline model, Equation (3). The mechanism is uncovered by grouping, which is demonstrated at the beginning of each section (lines 345-346, 367-368).
- b) The software we used in this research is indicated in lines 240-241.
8) Section 4 to be named simply “Results”.
Response: The name has been changed as “Results”
9) Section 5 seems to be a part of “Results”!
Response: Heterogeneity analyses are incorporated into Section 4.
10) Where is the section “Discussion” that must exist after “Results”. There, you have to provide the interpretations of your findings. What do they mean? Why the situation is so as registered? What are the possible implications? This section can be rather lengthy!
Response: We have added the section “Discussion”, in which we explain the results and present research and management implications, as well as research limitations and future directions.
11) Conclusions: I recommend you to include the numbered list of the main findings (2-3 from “Results” and 2-3 from “Discussion”).
Response: We have summarized the Results and the Discussion section and extracted the highlights in Conclusion.
12) References: too short! (see also recommendations for the literature additions given above).
Response: After revision, our literature has reached 73 articles.
Reviewer 2 Report
Comments and Suggestions for Authorsattached
Comments for author File: 
Comments.pdf
ok
Author Response
Thank you for your letter and for the reviewers’ comments concerning our manuscript entitled “Does Environmental Protection Law bring about greenwashing? Evidence from heavy-polluting firms in China” (ID: 2884489). Your comments are all valuable and very helpful for revising and improving our paper, as well as the important guiding significance to our researches. We have studied comments carefully and have made correction which we hope meet with approval. Revised portion are marked in red in the paper. The main corrections in the paper and the responds to the comments are as following:
1) The paper does not do a good job of discussing the implications of the findings. Why do we care? You should clarify the contributions of the paper which are not elaborated well in the current paper. You can talk about the following contributions: What insights can you provide based on your findings? Do they push forward our understanding? What should we do with your research? Do you have any suggestions to improve the current regulation or practice? Adding the above discussion and extending your literature review may help you make more contributions and position your contributions better.
Response: We have added a new section “Discussion”, in which we explain the results and present research and management implications, as well as research limitations and future directions.
2) For the measurement of greenwashing, it uses the difference between disclosure and performance. The literature shows that information disclosure also matters even if performance does not improve; improving disclosure should also be one of the objectives of EPL. Here you can refer to the literature that shows firms may abuse ESG/CSR to cover up fraud as in Li, Lu and Wang. 2023. Corporate Social Responsibility and Goodwill Impairment: Charitable Donations of Chinese Listed Companies. EPL may encourage such behavior and does similar damage as greenwashing.
Response: Thank you for your recommendation. We have added this literature in line 113.
3) You should develop sharper test to study channels of the effect. You need to discuss those aspects of possible channels to give readers a more comprehensive view and a richer story and/or point out future research direction from these perspectives.
Response: Thank you very much for your advice. But the availability of data makes it difficult to do a more pointed test that illustrates the influence channels.
4) You should study the responses to EPL from different types of firms. For example, state firms, firms of different sizes, etc. Related to the above point, you should study and rationalize the use of firm size measures in the literature since firm size is the key variable in this area and they simultaneously affect the independent and dependent variables. After all, it is the most significant variable in most studies alike. You need to discuss and justify your firm size measure.
Response: We use two ways to measure firm size, taking the logarithm of total assets and the logarithm of market capitalization. The results of EPL's effect on greenwashing in large and small firm sizes are shown in section 4.4.3 (Table 8). We also test the heterogeneity of ownership, but find that there is no significant difference between state-owned and non-state-owned firms. Hence, we decide not to present the results of ownership heterogeneity in the manuscript.
Table 8. Heterogeneity analysis of firm size
|
|
(1) |
(2) |
(3) |
(4) |
|
|
Greenwashing |
|||
|
VARIABLES |
Small Size Log(Asset) |
Large Size Log(Asset) |
Small Size Log(Market Capitalization) |
Large Size Log(Market Capitalization) |
|
Post×Treat |
0.0025 |
0.2719*** |
0.0484 |
0.3110*** |
|
|
(0.0737) |
(0.0972) |
(0.0772) |
(0.1018) |
|
Constant |
0.3166 |
0.1327 |
0.5480 |
-0.2718 |
|
|
(0.4107) |
(0.4282) |
(0.4306) |
(0.4114) |
|
Controls |
Yes |
Yes |
Yes |
Yes |
|
Firm FE |
Yes |
Yes |
Yes |
Yes |
|
Year FE |
Yes |
Yes |
Yes |
Yes |
|
|
|
|
|
|
|
Observations |
4,576 |
4,582 |
4,553 |
4,535 |
|
R-squared |
0.6328 |
0.6922 |
0.6316 |
0.7085 |
*Notes: Standard errors in parentheses, *** p<0.01, ** p<0.05, * p<0.1
Reviewer 3 Report
Comments and Suggestions for AuthorsThe introduction needs restatement. "Greenwashing" should be mentioned and defined early in the introductory paragraph. There is no need to offer several definitions of the term, since definitions are conventions, usually not subject to debate, and you already made your commitment to your use of the term before the reader gets to section 2.1. The statements made in 111, 133, and 124-5 are commonplace observations, if not truisms. Your conclusions as a whole are interesting, but not as sharply stated as they should be. For instance (447-8), "The government should pay attention to the enforcement strength after launching environmental governance policies." Indeed: laws are not self-enforced, and if a law cannot adequately be enforced, it is either a bad law, or a mere exercise in rhetoric.
Author Response
Thank you for your letter and for the reviewers’ comments concerning our manuscript entitled “Does Environmental Protection Law bring about greenwashing? Evidence from heavy-polluting firms in China” (ID: 2884489). Your comments are all valuable and very helpful for revising and improving our paper, as well as the important guiding significance to our researches. We have studied comments carefully and have made correction which we hope meet with approval. Revised portion are marked in red in the paper. The main corrections in the paper and the responds to the comments are as following:
1) The introduction needs restatement. "Greenwashing" should be mentioned and defined early in the introductory paragraph. There is no need to offer several definitions of the term, since definitions are conventions, usually not subject to debate, and you already made your commitment to your use of the term before the reader gets to section 2.1.
Response: “Greenwashing” is defined in lines 60-62 in the introductory paragraph. The discussion of greenwashing definitions in section 2.1 is cancelled.
2) The statements made in 111, 133, and 124-5 are commonplace observations, if not truisms.
Response: We acknowledge that these statements are indeed widely accepted. However, their inclusion in our reasoning is necessary and thus they need to be retained in the manuscript.
3) Your conclusions as a whole are interesting, but not as sharply stated as they should be. For instance (447-8), "The government should pay attention to the enforcement strength after launching environmental governance policies." Indeed: laws are not self-enforced, and if a law cannot adequately be enforced, it is either a bad law, or a mere exercise in rhetoric.
Response: In combination with the comments of another reviewer, we have added the section “Discussion”. In this section, we explain our results more clearly and present the implications of the research and practice.
Round 2
Reviewer 1 Report
Comments and Suggestions for AuthorsDear Authors,
thank you very much for your responses and revisions! Your manuscript looks much better. I have only three, easy-to-follow recommendations:
1) Please, cite 1-2 basic sources to support each of seven first sentences in the first paragraph of Introduction.
2) The text from the beginning of 5 and till the beginning of 5.1 to a new subseciton 5.1 (please, name it anyhow), with the consequent re-numbering of the other subsections of Discussion. I mean that if you divide any section into subsections, ALL text of this section should be attributed to any subsection.
3) Add any general, introductory sentence to "Conclusions" (name this section as Conclusions), and add a new, brief paragraph explaining the perspectives for the future research.
Comments on the Quality of English LanguageTo me, the text is fine. The minor polishing provided by MDPI together with the proof preparation should be enough.
Author Response
We feel great thanks for your professional review work on our article. As you are concerned, there are several problems that need to be addressed. According to your nice suggestions, we have made extensive corrections to our previous draft. The main corrections in the paper and the responds to the your comments are as following:
1) Please, cite 1-2 basic sources to support each of seven first sentences in the first paragraph of Introduction.
Response: We have added related sources for each of the first seven sentences and the references are as below.
- Skare, M.; Hasić, T. Corporate Governance, Firm Performance, and Economic Growth – Theoretical Analysis. Bus. Econ. Manag. 2016, 17, 35–51, doi:10.3846/16111699.2015.1071278.
- Mueller, P. Exploring the Knowledge Filter: How Entrepreneurship and University–Industry Relationships Drive Economic Growth. Policy 2006, 35, 1499–1508, doi:10.1016/j.respol.2006.09.023.
- Grossman, G.M.; Krueger, A.B. Economic Growth and the Environment. J. Econ. 1995, 110, 353–377, doi:10.2307/2118443.
- Huang, R.-J.; Zhang, Y.; Bozzetti, C.; Ho, K.-F.; Cao, J.-J.; Han, Y.; Daellenbach, K.R.; Slowik, J.G.; Platt, S.M.; Canonaco, F.; et al. High Secondary Aerosol Contribution to Particulate Pollution during Haze Events in China. Nature 2014, 514, 218–222, doi:10.1038/nature13774.
- Uddin, M.M.M. Revisiting the Impacts of Economic Growth on Environmental Degradation: New Evidence from 115 Countries. Ecol. Stat. 2021, 28, 153–185, doi:10.1007/s10651-020-00479-9.
- Yu, Y.; Li, K.; Duan, S.; Song, C. Economic Growth and Environmental Pollution in China: New Evidence from Government Work Reports. Energy Econ. 2023, 124, 106803, doi:10.1016/j.eneco.2023.106803.
- Why Is China’s Smog so Bad? Researchers Point Far Away to a Melting Arctic Available online: https://www.science.org/content/article/why-china-s-smog-so-bad-researchers-point-far-away-melting-arctic (accessed on 19 February 2024).
- Liu, Y.; Wang, A.; Wu, Y. Environmental Regulation and Green Innovation: Evidence from China’s New Environmental Protection Law. Clean. Prod. 2021, 297, 126698, doi:10.1016/j.jclepro.2021.126698.
- Fang, Z.; Kong, X.; Sensoy, A.; Cui, X.; Cheng, F. Government’s Awareness of Environmental Protection and Corporate Green Innovation: A Natural Experiment from the New Environmental Protection Law in China. Anal. Policy 2021, 70, 294–312.
- Kourula, A.; Moon, J.; Salles-Djelic, M.-L.; Wickert, C. New Roles of Government in the Governance of Business Conduct: Implications for Management and Organizational Research. Stud. 2019, 40, 1101–1123, doi:10.1177/0170840619852142.
2) The text from the beginning of 5 and till the beginning of 5.1 to a new subseciton 5.1 (please, name it anyhow), with the consequent re-numbering of the other subsections of Discussion. I mean that if you divide any section into subsections, ALL text of this section should be attributed to any subsection.
Response: We have named the beginning of 5 as “5.1 Key findings”.
3) Add any general, introductory sentence to "Conclusions" (name this section as Conclusions), and add a new, brief paragraph explaining the perspectives for the future research.
Response: We have renamed this section as “Conclusions” and added an introductory paragraph at the beginning of Conclusions (lines 572-575) and a very last paragraph to explain the future research direction (lines 586-590).
Reviewer 2 Report
Comments and Suggestions for AuthorsWell improved.
Comments on the Quality of English Languageok
Author Response
We feel great thanks for your professional review work on our article. We tried our best to improve the manuscript and made some changes marked in red in revised manuscript which will not influence the content and framework of the paper. We appreciate for Editors/Reviewers’ warm work earnestly, and hope the correction will meet with approval.
