Heterogeneous Paths to Sustainability: How Formal and Informal Environmental Regulations Shape Corporate Sustainability

The impact of environmental regulation (ER) on corporate sustainability has been widely studied, but few studies have comparatively analyzed this process from the dual perspectives of formal and informal environmental regulation (FER&IER). The impacts of top-down FER and bottom-up IER on firms remain an area that warrants further investigation. This study uses data from Chinese A-share listed companies between 2011 and 2023 to compare and analyze the impact of FER and IER on corporate sustainability. The results reveal that: (a) Both FER and IER enhance corporate sustainability, with the effect being more pronounced among state-owned enterprises, non-heavily polluting firms, and in the central and eastern regions. (b) Financing constraints, free cash flow, labor input, and R&D investment play differentiated roles under varying environmental regulatory contexts, and these channels collectively shape corporate sustainability. (c) FER and IER complement each other, promoting different sustainability dimensions. This research provides novel insights into the theoretical and empirical link between environmental regulation and long-term corporate development.