Specialization in Environmental Justiceand Enterprises’ ESG: Evidence fromthe Environmental Courts in China

Abstract

The environmental protection trial court, also known as the environmental resources trial court (henceforth referred to as the environmental court), is an institutional innovation in the field of environmental justice. To explore the influence of environmental judicial specialization on firms’ ESG performance and its mechanism, this study uses a sample of publicly traded firms from 2009 to 2022. The results demonstrate that environmental courts have significantly improved enterprises’ ESG performance. This conclusion remains valid following a series of robustness tests. From the three dimensions of ESG, environmental courts can significantly improve the performance of the corporate governance dimension in the current period. However, their impact on the environmental and social dimensions shows lagged effects. Environmental courts enhance enterprises’ ESG by reinforcing external constraints and internal impetus. The external constraint mechanism lies in enhancing government attention to green affairs, while the internal impetus mechanism lies in driving the digital transformation of companies. Based on the heterogeneity analysis, the positive effects of environmental courts are more pronounced in state-owned enterprises, those whose chairmen lack environmental protection backgrounds, and those located in cities with stronger public channels. It is essential to continuously deepen the specialization in environmental justice and refine the external pressure and internal motivation mechanisms to enhance enterprises’ ESG.

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