Skip to main content
SpringerLink
Log in

Does environmental performance affect financial performance? Evidence from Chinese listed companies in heavily polluting industries

  • Published:
Quality & Quantity Aims and scope Submit manuscript

Abstract

In recent years, environmental problems have occurred frequently in China, and the relationship between environmental performance (EP) and financial performance (FP) plays an indispensable role in exploring the internalization of corporate environmental responsibility. Using a sample of Chinese listed firms in heavily polluting industries and collected data of the Unit Sewage Fee, we empirically examine the impact of EP on FP. Our empirical results show a concave-down quadratic relationship between EP and FP. After heavily polluting industries became subject to stricter environmental disclosure regulations, however, we found that the quadratic relationship between EP and FP became weaker. Moreover, we revealed that for state-owned firms, the quadratic relationship between EP and FP is not as obvious as it is for non-state-owned firms. Our paper contributes to the growing literature on EP management. It also offers evidence of experience in perfecting the design of enterprise environmental information disclosure systems.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2

Similar content being viewed by others

Notes

  1. http://wfs.mep.gov.cn/gywrfz/hbhc/zcfg/201009/W020100914403449464600.pdf.

  2. http://wfs.mep.gov.cn/gywrfz/hbhc/zcfg/201009/W020100914403449464600.pdf.

  3. http://www.stats.gov.cn/tjsj/ndsj/2015/indexch.htm.

  4. http://www.cninfo.com.cn/cninfo-new/index.

  5. Based on the industry classification of China Securities Regulatory Commission(CSRC).

  6. Some firms do not disclose the sewage fee every year.

  7. http://wfs.mep.gov.cn/gywrfz/hbhc/zcfg/201009/W020100914403449464600.pdf.

References

  • Aragoncorrea, J.: Strategic proactivity and firm approach to the natural environment. Acad. Manag. J. 41(5), 556–567 (1998)

    Google Scholar 

  • Aschehoug, S.H., Boks, C., Støren, S.: Environmental information from stakeholders supporting product development. J. Clean. Prod. 31(12), 1–13 (2012)

    Article  Google Scholar 

  • Bruton, G.D., Peng, M.W., Ahlstrom, D., Stan, C.V., Xu, K.: State-owned enterprises around the world as hybrid organizations. Acad. Manag. Perspect. 29(1), 92–114 (2015)

    Article  Google Scholar 

  • Chang, L., Li, W., Lu, X.: Government engagement, environmental policy, and environmental performance: evidence from the most polluting Chinese listed firms. Bus. Strategy Environ. 24(1), 1–19 (2015)

    Article  Google Scholar 

  • Chen, F., Xu, Y.: Democratization in the host country and institutional risk of cross-border M&A: an empirical study on Chinese listed enterprises. Qual. Quant. 48(2), 1013–1025 (2014)

    Article  Google Scholar 

  • Cohen, M.A., Fenn, S., Naimon, J.S.: Environmental and Financial Performance: Are They Related?. Investor Responsibility Research Center, Environmental Information Service, New York City (1995)

    Google Scholar 

  • Coleman, L.: Losses from failure of stakeholder sensitive processes: financial consequences for large US companies from breakdowns in product, environmental, and accounting standards. J. Bus. Ethics 98(2), 247–258 (2011)

    Article  Google Scholar 

  • Connors, E., Johnston, H.H., Gao, L.S.: The informational value of Toxics Release Inventory performance. Sustain. Acc. Manag. Policy J. 4(1), 32–55 (2013)

    Google Scholar 

  • Dögl, C., Holtbrügge, D.: Corporate environmental responsibility, employer reputation and employee commitment: an empirical study in developed and emerging economies. Int. J. Hum. Resour. Manag. 25(12), 1739–1762 (2014)

    Article  Google Scholar 

  • Gerde, V.W., Logsdon, J.M.: Measuring environmental performance: use of the toxics release inventory (tri) and other us environmental databases. Bus. Strategy Environ. 10(5), 269–285 (2010)

    Article  Google Scholar 

  • Gilley, K.M., Worrell, D.L., Iii, W.N.D., Abuzar, E.-J.: Corporate environmental initiatives and anticipated firm performance: the differential effects of process-driven versus product-driven greening initiatives. J. Manag. 26(6), 1199–1216 (2000)

    Google Scholar 

  • Gonenc, H., Scholtens, B.: Environmental and financial performance of fossil fuel firms: a closer inspection of their interaction. Ecol. Econ. 132, 307–328 (2017)

    Article  Google Scholar 

  • Hart, S.L.: A natural-resource-based view of the firm. Acad. Manag. Rev. 20(4), 986–1014 (1995)

    Article  Google Scholar 

  • Hart, S.L., Ahuja, G.: Does it pay to be green? an empirical examination of the relationship between emission reduction and firm performance. Bus. Strategy Environ. 5(1), 30–37 (1996)

    Article  Google Scholar 

  • He, Y., Chiu, Y., Zhang, B.: The impact of corporate governance on state-owned and non-state-owned firms efficiency in China. N. Am. J. Econ. Finance 33, 252–277 (2015)

    Article  Google Scholar 

  • Horváthová, E.: Does environmental performance affect financial performance? A meta-analysis. Ecol. Econ. 70(1), 52–59 (2010)

    Article  Google Scholar 

  • Horváthová, E.: The impact of environmental performance on firm performance: short-term costs and long-term benefits? Ecol. Econ. 84(2), 91–97 (2012)

    Article  Google Scholar 

  • Iwata, H., Okada, K.: How does environmental performance affect financial performance? Evidence from Japanese manufacturing firms. Ecol. Econ. 70(9), 1691–1700 (2011)

    Article  Google Scholar 

  • Jaggi, B., Freedman, M.: An examination of the impact of pollution performance on economic and market performance: pulp and paper firms. J. Bus. Finance Acc. 19(5), 697–713 (2006)

    Article  Google Scholar 

  • Khanna, T., Nohria, G.N.: The dynamics of learning alliances: competition, cooperation, and relative scope. Strateg. Manag. J. 19(3), 193–210 (1998)

    Article  Google Scholar 

  • Kubas, A., Inan, I.H., Unakitan, G., Erbay, E.R.: The estimation of the relationships between water-natural gas usage and discharge-emission permission by using binary logistic model for the industrial establishments. Qual. Quant. 42(1), 35–44 (2008)

    Article  Google Scholar 

  • Latan, H., Chiappetta Jabbour, C.J., Beatriz, L.D.S.J.A., Renwick, D.W.S., Wamba, S.F., Shahbaz, M.: ‘Too-much-of-a-good-thing’? The role of advanced eco-learning and contingency factors on the relationship between corporate environmental and financial performance. J. Environ. Manag. 220, 163–172 (2018)

    Article  Google Scholar 

  • Li, Q., Luo, W., Wang, Y., Wu, L.: Firm performance, corporate ownership, and corporate social, responsibility disclosure in China. Bus. Ethics A Eur. Rev. 22(2), 159–173 (2013)

    Article  Google Scholar 

  • Lucato, W.C., Costa, E.M., Cardoso, D.O.N.G.: The environmental performance of SMEs in the Brazilian textile industry and the relationship with their financial performance. J. Environ. Manag. 203, 550–556 (2017)

    Article  Google Scholar 

  • Montabon, F., Sroufe, R., Narasimhan, R.: An examination of corporate reporting, environmental management practices and firm performance. J. Oper. Manag. 25(5), 998–1014 (2007)

    Article  Google Scholar 

  • Muhammad, N., Scrimgeour, F., Reddy, K., Abidin, S.: The impact of corporate environmental performance on market risk: the Australian industry case. J. Bus. Ethics 132(2), 347–362 (2015)

    Article  Google Scholar 

  • Muhammad, N., Scrimgeour, F., Reddy, K., Abidin, S.: Emission indices for hazardous substances: an alternative measure of corporate environmental performance. Corp. Soc. Responsib. Environ. Manag. 23(1), 15–26 (2016)

    Article  Google Scholar 

  • Nasrin, S., Rasiah, R., Baskaran, A., Masud, M.M.: What determines the financial performance of microfinance institutions in Bangladesh? a panel data analysis. Qual. Quant. 52(3), 1409–1422 (2018)

    Article  Google Scholar 

  • Nishitani, K., Jannah, N., Kaneko, S.: Does corporate environmental performance enhance financial performance? An empirical study of indonesian firms. Environ. Dev. 23, 10–21 (2017)

    Article  Google Scholar 

  • Porter, M.E., Linde, C.V.D.: Toward a new conception of the environment–competitiveness relationship. J. Econ. Perspect. 9(4), 97–118 (1995)

    Article  Google Scholar 

  • Qi, G.Y., Zeng, S.X., Shi, J.J., Meng, X.H., Lin, H., Yang, Q.X.: Revisiting the relationship between environmental and financial performance in Chinese industry. J. Environ. Manag. 145, 349–356 (2014)

    Article  Google Scholar 

  • Qiu, R., Xu, J., Zeng, Z.: Carbon emission allowance allocation with a mixed mechanism in air passenger transport. J. Environ. Manag. 200, 204–216 (2017)

    Article  Google Scholar 

  • Rassier, D.G., Earnhart, D.: Does the porter hypothesis explain expected future financial performance? The effect of clean water regulation on chemical manufacturing firms. Environ. Resour. Econ. 45(3), 353–377 (2010)

    Article  Google Scholar 

  • Sarkis, J., Cordeiro, J.J.: An empirical evaluation of environmental efficiencies and firm performance: pollution prevention versus end-of-pipe practice. Eur. J. Oper. Res. 135(1), 102–113 (2001)

    Article  Google Scholar 

  • Sen, P., Roy, M., Pal, P.: Exploring role of environmental proactivity in financial performance of manufacturing enterprises: a structural modelling approach. J. Clean. Prod. 108, 583–594 (2015)

    Article  Google Scholar 

  • Song, H., Zhao, C., Zeng, J.: Can environmental management improve financial performance: an empirical study of A-shares listed companies in China. J. Clean. Prod. 141, 1051–1056 (2017)

    Article  Google Scholar 

  • Tan, S.H., Habibullah, M.S., Tan, S.K., Choon, S.W.: The impact of the dimensions of environmental performance on firm performance in travel and tourism industry. J. Environ. Manag. 203, 603–611 (2017)

    Article  Google Scholar 

  • Wagner, M.: The role of corporate sustainability performance for economic performance: a firm-level analysis of moderation effects. Ecol. Econ. 69(7), 1553–1560 (2010)

    Article  Google Scholar 

  • Wagner, M., Schaltegger, S., Wehrmeyer, W.: The relationship between the environmental and economic performance of firms: what does theory propose and what does empirical evidence tell us? Corp. Soc. Responsib. Environ. Manag. 9(3), 133–146 (2012)

    Article  Google Scholar 

  • Wang, L.: The changes of China’s environmental policies in the latest 30 years. Procedia Environ. Sci. 2, 1026–1212 (2010)

    Google Scholar 

  • Xie, C., Luo, C., Yu, X.: Financial distress prediction based on SVM and MDA methods: the case of Chinese listed companies. Qual. Quant. 45(3), 671–686 (2011)

    Article  Google Scholar 

  • Xu, X., Zeng, Z., Xu, J., Zhang, M.: Fuzzy dynamical system scenario simulation-based cross-border financial contagion analysis: a perspective from international capital flows. IEEE Trans. Fuzzy Syst. 25(2), 439–459 (2017)

    Article  Google Scholar 

  • Zeng, Z., Zhu, W., Ke, R., Ash, J., Wang, Y., Xu, J., Xu, X.: A generalized nonlinear model-based mixed multinomial logit approach for crash data analysis. Accid. Anal. Prev. 99, 51–65 (2017)

    Article  Google Scholar 

  • Zhu, Q., Liu, J., Lai, K.H.: Corporate social responsibility practices and performance improvement among Chinese national state-owned enterprises. Int. J. Prod. Econ. 171, 417–426 (2016)

    Article  Google Scholar 

Download references

Acknowledgements

This research was supported by the Humanities and Social Sciences Foundation of the Ministry of Education of China (Grant Nos. 17YJC630119, 16YJC630089). It was also supported by Soft Science Program of Sichuan Province (Grant No. 2019JDR0155), by the Fundamental Research Funds for the Central Universities (Grant No. JBK1801009) and the Research Center for System Sciences and Enterprise Development (Grant No. Xq18B07).

Author information

Authors and Affiliations

  1. School of Finance, Southwestern University of Finance and Economics, Chengdu, 611130, People’s Republic of China

    Feng Shen, Run Wang & Ningning Pan

  2. Carey Business School, Johns Hopkins University, Baltimore, USA

    Yunwen Ma

  3. Business School, Sichuan University, Chengdu, 610065, China

    Zhiyi Meng

Authors
  1. Feng Shen
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Yunwen Ma
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Run Wang
    View author publications

    You can also search for this author in PubMed Google Scholar

  4. Ningning Pan
    View author publications

    You can also search for this author in PubMed Google Scholar

  5. Zhiyi Meng
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Zhiyi Meng.

Additional information

Publisher's Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Shen, F., Ma, Y., Wang, R. et al. Does environmental performance affect financial performance? Evidence from Chinese listed companies in heavily polluting industries. Qual Quant 53, 1941–1958 (2019). https://doi.org/10.1007/s11135-019-00849-x

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11135-019-00849-x

Keywords

Search

Navigation