Government Environmental Audit Can Improve Company Performance

Abstract

Environmental regulation could affect many aspects of production and operation of companies. Company performance is an important index to measure its operation. We use a quasi-natural experiment to explore how government environmental auditing influence company performance in China from 2003 to 2017. The results illustrate that environmental auditing could improve company performance. This effect is more significant in state-owned company and private company than in foreign and other company. It also influence more significantly on companies with low technical level than high technical level. The difference of internal control level of a company does not have significant influence on the impact of environmental auditing on company performance. We further examine the moderate impact of innovation. The result shows that under the supervision of government auditing, the performance of companies with high innovation ability would be better.