Abstract:  Since 2013, the State Council of China, in conjunction with four other ministries and commissions, such as the Ministry of Environmental Protection, the Ministry of Industry and Information Industry, the People′s Bank of China and National Development and Reform Commission, has formulated a number of guidance on enterprises′ faith-breaking punishment in environmental pollution and dishonesty, aiming at supervising and controlling the production units with serious environmental dishonesty. Under this context, China′s environmental governance is increasingly showing an unprecedented signs of high pressure. Local governments have successively carried out "environmental credit rating" for local enterprises, and have adopted a zero tolerance governance attitude of “each report must be checked” and “each check must be deal”. However, in contrast to the environmental protection storm, enterprises pollution is still difficult to control. Latest evidence from the Ministry of Ecology and Environment of China show that, from 2010 to 2015, the total industrial waste water discharge has raised from 61.73 billion tons to 73.53 billion tons, and the cost of environmental pollution caused by economic development has raised from 511.82 billion RMB to 894.76 billion RMB.According to Institution-based View (IBV), legitimacy is the key element for enterprises to obtain public and social recognition, and enterprise activities and strategies should depend on legality, such as laws and regulations. However, the IBV theory is somewhat contrary to the actual situation, and cannot explain the disciplinary failure in China. Under this condition, this paper puts forward the hypothesis of “chilling effect” of dishonesty punishment measurement on enterprise pollution from two dimensions: risk and cost. That is to say, when the comparative advantage brought by legitimacy, such as follow the laws and rules, cannot make up for the loss caused by pollution control and equipment replacement, the enterprises will inevitably choose against laws and take risk on continuous pollution. Especially in the bottom competition, most manufacture enterprises are more willing to take chance to reduce marginal costs than following the government guidance. In the meanwhile, we believes that enterprise pollution is closely related with the stringency of faith-breaking punishment, and only when the punishment intensity reaches a certain value, the probability of enterprise pollution violation will be reduced gradually. Accordingly, we propose a theoretical assumption that the relationship of faith-breaking punishment and pollution control is in the inverted U shape.In order to test the above hypothesis, this paper takes 758 waste water state-controlled polluting enterprises as samples, most of them are from Beijing-Tianjin-Hebei region, Yangtze River Delta and Pearl River Delta. We combined the regional pollution penalty records published by the municipal Environmental Protection Bureaus in 2015, and investigates the effect of faith-breaking punishment on enterprise pollution control through Tobit regression and sub sample regression. The findings are as follows:(1)There is a significant positive correlation between faith-breaking punishment and enterprise pollution. The cross examination of Beijing-Tianjin-Hebei region, Yangtze River Delta and Pearl River Delta also confirms the above findings, indicating that the current faith-breaking punishment has not yet controlled the enterprise pollution successfully.(2)There is a significant inverted U relationship between the stringency of faith-breaking punishment and enterprise pollution. The results shows that, the inflection value of faith-breaking punishment is about 9.42, which is far beyond the mean value (2.75) and maximum value (8.0) of Chinese enterprises, indicating that the current faith-breaking punishment intensity has not entered the downward range of the constraint.(3)The state-owned enterprises (SOEs) are more sensitive to the faith-breaking punishment. The inflection value of SOEs is about 2.63, which is far less than that of the Non-SOEs (about 11.17). Moreover, for each additional intensity of faith-breaking punishment, the change of pollution in SOEs will be greater than that of Non-SOEs. These findings confirm that, in the process of punishment, the SOEs are the first to reach the inflection point, which playing a leading role in pollution control, while the Non-SOEs have a strong “immunity” to the high-pressure punishment. Both the level of urban industrialization and the dependence on natural resources of cities have negative moderating effect on chilling effect. The higher the level of urban industrialization, and the greater the dependence on natural resources, the higher the inflection value of faith-breaking punishment.The policy implications of this study includes: (1) establishing and improving the laws and regulations of faith-breaking punishment, increasing the scope of punishment, and gradually reducing the probability of enterprise pollution. On the one hand, it is necessary to implement the “two strictest” governance policy specified by the sixth collective learning of the Political Bureau of the CPC Central Committee. On the other hand, it is necessary to strengthen the dynamic matching between the laws and regulations related to faith-breaking punishment and the development of local enterprises. (2) we should pay more attention to the pollution control of Non-SOEs instead of SOEs, and recognize their core differences in face of environmental policies, so as to effectively balance the enterprise differences in the process of pollution supervision. (3) we should strengthen the transformation of regional economic structure and optimize the industrial structure, and gradually reduce the dependence on coal, fossil fuels, minerals and other natural resources. 

Key words:  faith-breaking punishment, chilling effect, institution-based view