Redefining the Rulebook: How Biodiversity Regulations Shape Firm Environmental Uncertainty
Jinlong Zhang, Huanhuan HaoABSTRACT
Question/Issue
This study examines firm performance under biodiversity regulation. Using a quasi‐natural experiment of China's Green Shield Special Program (GNSP), we evaluate the impact of GNSP on firm environmental uncertainty.
Research Findings/Insights
The GNSP framework, by effectively addressing the traditional central–local principal–agent problem, significantly reduces environmental uncertainty for firms within national nature reserves (NNRs) through its super‐hierarchical supervision. This effect, however, is confined to NNRs and is not observed for firms in provincial, municipal, or county nature reserves. We find that the reduction in environmental uncertainty is achieved through three channels: improved environmental information disclosure, enhanced green technological innovation, and optimized resource allocation efficiency. We also find that the uncertainty‐reducing effect is most pronounced for firms with a high demand for fair competition, strong response capabilities, or facing urgent transformation pressure.
Theoretical/Academic Implications
First, we provide empirical support for the Porter Hypothesis in biodiversity regulation, demonstrating that mandatory environmental policies can stimulate innovation and reduce firm‐level uncertainty by providing clearer regulatory expectations. Second, by examining GNSP's super‐hierarchical supervision and social co‐governance framework, we extend environmental federalism theory and offer a new perspective on the microeconomic consequences of campaign‐style governance. Third, we integrate biodiversity risks into corporate decision‐making, thereby contributing to the emerging field of biodiversity finance and providing microlevel evidence for governing nature‐related risks.
Practitioner/Policy Implications
This study provides empirical evidence to support the implementation of the Kunming‐Montreal Global Biodiversity Framework. We recommend that policymakers strengthen central vertical supervision while simultaneously enhancing the transparency and predictability of enforcement and tailor supporting incentive measures to enterprise heterogeneity to maximize the impact of biodiversity regulations on green transformation.