Abstract
Environmental labels are designed to signal environmental and health information on products throughout their life cycle to consumers and other stakeholders. Investigating A-share listed manufacturing firms in China for the 2004–2018 period, this paper sheds new light on the nexus of environmental labeling certifications and firm performance. We find that there is a grouping difference in firm performance between treatment firms and comparison firms, no matter whether measured by ROA, Tobin’s Q, or TFP. Based on the difference-in-difference (DID) regression, we show that manufacturing firms significantly increase their financial performance and productivity after obtaining environmental labeling certifications. Our research also reveals that the effects of environmental labels on firm performance stem from both the labeling effect and technical factor. The results are robust when we use the micro-level DID model. Further examination shows that the intervention effect is mainly driven by the mechanism of price markup rather than by market share.
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