Market-incentive environmental regulation and business performance of new energy vehicle enterprises: empirical evidence from China’s dual-credit policy

The operational and sustainable development of new energy vehicle (NEV) companies represent crucial steps in the transportation sector’s decarbonization efforts and in achieving carbon peak and carbon neutrality goals. In order to promote the diffusion of NEVs, China issued the dual credit policy in 2017. This paper takes the dual credit policy as a quasi-natural experiment, and then adopts the propensity score matching difference-in-difference method to study the effect of dual credit policy on the business performance of NEV enterprises. Based on the panel data of 27 listed NEV enterprises in China from 2013 to 2020, we find that: (1) the dual credit policy significantly improves the business performance of listed NEV enterprises, and this conclusion is still robust in a series of robustness tests; (2) in terms of mechanism, the dual credit policy internalizes the regulatory pressure into the driving force of enterprise operation by increasing R&D investment and vehicle sales, so as to ultimately improve its business performance; (3) heterogeneity analysis shows that when the property rights are state-owned, the scale is large and the policy has been implemented for a long time, the dual credit policy has a more significant effect on the business performance of enterprises. This study not only enriches the literature related to corporate performance and regulatory policies but also explores the feasibility of businesses, particularly emerging industry enterprises, internalizing the pressures of regulatory policies as a driving force for their operations. Furthermore, the research results provide policymakers with more accurate and comprehensive empirical evidence and facilitate heterogeneous discussions concerning various businesses. This, in turn, offers a theoretical foundation and valuable insights for policymakers to further adjust and optimize dual-credit policies.