Do politicians’ incentives to meet and beat expectations in economic performance influence corporate environmental performance?

This study examines whether and how politicians’ incentives to meet and beat expectations (MBE incentives) regarding economic performance affect corporate environmental performance. Existing accounting literature focuses on managerial MBE incentives regarding analyst forecasts. Although recent studies examine politicians’ MBE incentives in relation to economic performance, evidence on these incentives’ real and environmental effects remains scarce. Our analysis for 2011–2020 reveals that firm-specific sulphur dioxide emissions are higher in Chinese provinces with stronger MBE incentives regarding gross domestic product growth. This effect is more pronounced when provincial politicians have a stronger business influence and promotion aspirations, and among firms in energy-intensive industries. Several channels mediate this phenomenon: weakened provincial environmental regulations, reduced investments in emission-abatement technologies, and increased emission-generating production activities. Overall, politicians’ MBE incentives contribute to a conflicting and dynamic relationship between economic and environmental performance.