How air pollution affects corporate total factor productivity?

by Jialiang Yang, Wen Yin

To explore the relationship between air pollution and total factor productivity and new pathways, This paper examines the impact of air pollution on total factor productivity of A-share listed companies in Shanghai and Shenzhen between 2015 and 2019. It investigates this relationship by considering two pathways: investor sentiment and government attention. The findings indicate that air pollution suppresses total factor productivity of firms. However, air pollution stimulates investor sentiment, which in turn increases R&D investment and total factor productivity, reducing to some extent the dampening effect of air pollution on total factor productivity. There exists a notable positive correlation between air quality and government attention, acting as a mediating variable. This implies that air pollution has the potential to capture the attention of governmental entities, leading to the implementation of appropriate measures aimed at managing and mitigating the occurrence of air pollution caused by industrial enterprises.And the relevant governments should formulate a series of policies to meet the different needs of different enterprises. These two approaches have varying impacts depending on the type of enterprises, thus governments should develop laws to cater to the various demands of different types of enterprises.