| Summary: | ABSTRACT: Numerous studies evaluated the effects of end-of-pipe control environmental regulations (EER). However, few scholars discussed the effects of process management environmental regulations (PER), such as the China Cleaner Production Standards (CCPS) implemented by the country's Ministry of Ecology and Environment. Using data on China's manufacturing enterprises, this paper adopts the CCPS policies as quasi-natural experiments and uses differences-in-differences (DID) methods to analyze their effects on enterprise profitability and profit quality, respectively. The results show that: first, the CCPS significantly improve both profitability and profit quality; that is, the implementation of the environmental regulation policy plays a significant role in improving enterprise profit rates and cash flows. Second, for the profitability mediator effects, the short-term Porter effect of CCPS is not significant but shows the opposite during the lag period and significantly reduces the management cost and wage levels, comprehensively promoting enterprise profitability. Third, for the profit quality meditator effects, environmental regulations improve the enterprises' cash flow by reducing management costs and increasing government subsidies; however, its effect on bank credit subsidies is not significant. Fourth, for the moderator effects, the environmental regulations' effect on enterprises profitability and profit quality depends on the strategic interaction among local governments, the scale and ownership of the enterprise, and regional differences. That is, the strategic interaction weakens the effect of environmental regulations on enterprise performance. Environmental regulations have a stronger influence on profitability and profit quality for large-scale, state-owned, and coastal enterprises.
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