The outgoing audit of natural resources assets and enterprise productivity: New evidence from difference-in-differences-in-differences in China.

Despite increasing evidence documenting the role of the outgoing audit of natural resources (OANRA) in environmental governance and enterprise innovation, little is known about its impact on enterprises' total factor productivity (TFP). To address this question, we treat the OANRA policy launched in 2014 in China as a quasi-natural experiment. We adopt a difference-in-differences-in-differences (DDD) method that exploits three-dimensional variations: city (i.e., OANRA cities versus non-OANRA cities), industry (i.e., more polluting industries versus less polluting ones), and year (i.e., before and after the OANRA policy). Employing a dataset of Chinese industrial listed companies from 2012 to 2019, we reveal that after the OANRA implementation, enterprises' TFP in more polluting industries of OANRA cities decreases by 4.0%. Our mechanism analysis shows that the OANRA restrains the TFP by reducing the financing scale of enterprises and increasing environmental investment of governments. Further, the heterogeneity analysis finds the inhibitory effect of the OANRA is more prominent in large-scale and state-owned enterprises, as well as enterprises located in eastern, low fiscal pressure, and high pollutant emission cities. Our findings provide support for the neoclassical economics hypothesis that the OANRA increases enterprises' compliance costs and decreases their productivity.