Conference Agenda

Judicial institutions are increasingly recognized as central to development, yet their role in environmental governance remains underexplored. This paper investigates the causal impact of environmental court establishment on corporate environmental alliance formation in China, using a staggered difference-in-differences design and panel data on 2,961 publicly listed firms from 2005 to 2022. We find that courts substantially increase the likelihood of forming environmental alliances. The induced alliances follow two distinct logics. Alliances with government entities act as institutional insurance: they substitute for voluntary disclosure and buffer firms against subsidy losses, with stronger effects in heavy‑polluting sectors, but they do not yield measurable environmental improvements. Alliances with academic partners build capability: they increase green invention patenting and environmental investment, resulting in improvements in environmental quality. Such effects are larger where legal capacity is weak, suggesting that courts function as institutional substitutes in low‑capacity settings. We conclude that environmental courts shift firms toward collaboration, but environmental gains depend on alliance type. These findings highlight how judicial innovations can strengthen environmental governance in contexts with limited enforcement capacity, which is essential for sustainable development in emerging economies.