Turning green through within‐firm adjustment: Evidence from environmental court in China

Abstract

This paper investigates how the setup of special environmental courts is accountable for firms' internal adjustment of production and export across industries with different pollution intensities. Inspired by a simple theoretical model, we find that, after the establishment of environmental courts, firms see a larger decrease in export value, export quantity, export variety as well as export destination in more polluting industries. We further find different impacts on firms with varying ownership and size. These findings imply that companies reallocate their available resources from more polluting varieties to less polluting ones, thus turning green through this within‐firm adjustment.