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ABSTRACT Geographic proximity between regulators and firms can significantly influence economic activities. The impact of regulatory proximity from environmental regulators on corporate green innovation remains unclear in existing literature. We address this gap by utilizing a sample of Chinese listed firms from 2007 to 2020. Our findings reveal that a closer geographical distance between firms and their corresponding Environmental Protection Administration positively affects corporate green innovation. Notably, this relationship is particularly pronounced among firms located in regions with more frequent environmental penalties, higher local government environmental protection expenditure, and greater intensity of public environmental petitions. Further analyses of the mechanisms indicate that our findings are driven by the resource acquisition effect, the enhanced environmental ethics effect, and the regulatory deterrence effect. Additionally, a series of endogeneity tests and robustness checks are employed to provide robust support for our hypotheses. This study underscores the pivotal role regulatory proximity plays in shaping firms' ethical conduct and innovative endeavors within the environmental sustainability landscape.
Sun et al. (Fri,) studied this question.