Market-Based Environment or Property Rights Protection? The Environmental Regulation of a Developing Country

Market-Based Environment or Property Rights Protection? The Environmental Regulation of a Developing Country | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Article Market-Based Environment or Property Rights Protection? The Environmental Regulation of a Developing Country Xiancheng Xiong, Chen Zhong This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-6263163/v1 This work is licensed under a CC BY 4.0 License Status: Posted Version 1 posted You are reading this latest preprint version Abstract The Porter Hypothesis (1991) stipulates that environmental regulations (ER) should be "tight but flexible" and employ market-based instruments to enhance firm performance. This paper identifies internal property rights protection as a complementary factor that explains the promotional effect of environmental regulations in a developing country where market-based instruments are weak. To support our theory, we present evidence from China showing that state shares can substitute for market-based instruments in upholding the Porter Hypothesis in a developing country. Additional evidence reveals that state shares primarily operate in firms characterized by low bank loan ratios and high information-acquisition costs. The results suggest that an increase in bank loans and a reduction in information-acquisition costs are two key mechanisms through which environmental regulations enhance firm performance in a developing country. Our conclusions offer new insights into rethinking the Porter Hypothesis in developing countries. Social science/Economics Social science/Environmental studies Social science/Finance Environmental Regulation Firm Performance State Shares Porter Hypothesis Developing country Full Text Additional Declarations No competing interests reported. Cite Share Download PDF Status: Posted Version 1 posted You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. 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Also discoverable on Platform About Our Team In Review Editorial Policies Advisory Board Help Center Resources Author Services Accessibility API Access RSS feed Manage Cookie Preferences © Research Square 2026 | ISSN 2693-5015 (online) Privacy Policy Terms of Service Do Not Sell My Personal Information {"props":{"pageProps":{"initialData":{"identity":"rs-6263163","acceptedTermsAndConditions":true,"allowDirectSubmit":true,"archivedVersions":[],"articleType":"Article","associatedPublications":[],"authors":[{"id":456928451,"identity":"d63ed644-4315-43fc-8092-ae46a77477f8","order_by":0,"name":"Xiancheng Xiong","email":"data:image/png;base64,iVBORw0KGgoAAAANSUhEUgAAAZAAAAAyAQMAAABI0h/eAAAABlBMVEX///8AAABVwtN+AAAACXBIWXMAAA7EAAAOxAGVKw4bAAABC0lEQVRIie3RsUrEMBjA8ZRAbvn01oDY4ht8JXAgyj1LQqGTHEKXG3MU6qSzBz5EHyFH4Vz6AIJLRHByqIs4dLBRFBwabxTMf8gQvh8hCSGh0B+MUWqMRB4nyaPBr13uI/uTSll7fipSncuB4O8khlaktsuVNmdufAfCuJxxiY1a6bYroO8XaOjmHsh84SG5I+IiuqzTdYUFGpadAMkKD9k6crgq92p80ahqA7MDIEbpUaIqRyK9BYuyd2T66ifQUJSYH+kWCHbs4xTmJ5MqshKHR75mONxFqHXDxPENZqMkKafd5q0fvpLTJwF9rK5uy4e75+V8lPw48fNTqFvQO/kdtbvNhUKh0H/rHUmLWdyiRkMtAAAAAElFTkSuQmCC","orcid":"","institution":"Jiangxi Science and Technology Normal University","correspondingAuthor":true,"prefix":"","firstName":"Xiancheng","middleName":"","lastName":"Xiong","suffix":""},{"id":456928452,"identity":"a6b1b9c7-5bc0-4570-8c8b-d4d2595dbbbe","order_by":1,"name":"Chen Zhong","email":"","orcid":"","institution":"Jiangxi Science and Technology Normal University","correspondingAuthor":false,"prefix":"","firstName":"Chen","middleName":"","lastName":"Zhong","suffix":""}],"badges":[],"createdAt":"2025-03-19 15:53:14","currentVersionCode":1,"declarations":"","doi":"10.21203/rs.3.rs-6263163/v1","doiUrl":"https://doi.org/10.21203/rs.3.rs-6263163/v1","draftVersion":[],"editorialEvents":[],"editorialNote":"","failedWorkflow":false,"files":[{"id":86500728,"identity":"c41113dc-0d17-490d-9e81-285534a75152","added_by":"auto","created_at":"2025-07-11 11:01:57","extension":"pdf","order_by":1,"title":"","display":"","copyAsset":false,"role":"manuscript-pdf","size":488539,"visible":true,"origin":"","legend":"","description":"","filename":"Manuscriptwithanonymised.pdf","url":"https://assets-eu.researchsquare.com/files/rs-6263163/v1_covered_a85ea012-760a-43b9-897d-3012fd6aece3.pdf"}],"financialInterests":"No competing interests reported.","formattedTitle":"Market-Based Environment or Property Rights Protection? 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