Description:
This study examines peer influence, and its underlying motives, on environmental protection performance. We find consistent evidence of peer effects on environmental protection performance among Chinese firms. When the average environmental protection score of industry peers increases by one point, the focal firm imitates and increases its future environmental score by 5.7%. In contrast to prior studies, we find that such peer effects cannot be explained by market competition but are largely due to information cascades and managerial career concerns. Additional tests show that peer effects are more pronounced among non-state-owned firms and those in low-polluting areas with a high pressure of regional economic growth