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Do environmental regulations, while crucial for ecological sustainability, inadvertently distort corporate long-term strategic priorities? Using China’s “Air Pollution Prevention and Control Action Plan” (Air Ten Articles) as a quasi-natural experiment, this study shifts the focus from pollution levels to policy-induced risk to address this question. Analyzing A-share listed firms with a Difference-in-Differences (DID) design, we find that increased air pollution risk systematically shifts corporate relative strategic emphasis (RSE) away from long-term value creation toward short-term value appropriation. Our mechanism analysis shows that financial constraints are a key driver of this strategic reallocation. Furthermore, this effect is more pronounced in highly competitive industries, where pressure to maintain market position exacerbates the preference for lower-risk appropriation strategies. These findings suggest that environmental policy may have unintended consequences, such as suppressing corporate innovation, offering important insights for policymakers and managers navigating the strategic trade-offs in the green transition.
Wu et al. (Mon,) studied this question.