Precision pollution control and firm productivity under list-based regulation: evidence from China's key polluting...

Balancing pollution control with high-quality growth motivates a shift from campaign-style approach to precision regulation. We examine China's Key Polluting Enterprises (KPE) system, which balances strict oversight of high-risk polluters with compliance flexibility for cleaner firms. Using panel data on Chinese A-share listed firms from 2013 to 2022 and a quasi-experimental design, we find that KPE designation raises firm total factor productivity by approximately 2.4%. Early entrants experience productivity gains above 10% while later cohorts show weaker effects, suggesting diminishing returns. We identify increased innovation effort, measured by R&D investment and staffing, as a key mechanism, and find that environmental transparency through voluntary information disclosure amplifies the productivity benefits. The productivity effects are also stronger in cities with a higher concentration of key polluting enterprises. Our findings highlight that list-based regulation can generate productivity gains when combined with credible oversight, innovation-oriented adjustment, and transparency-enhancing practices.