Money talks: How financial constraint influence corporate environmental behavior prioritization

Abstract

Financial constraints (FCs) have a well-documented impact on corporate environmental behavior (CEB), including increasing pollution emissions and hindering green innovation. However, the prioritization of these tasks especially under regulatory pressure remains an unexplored area. This study investigates how FCs affect CEB, the priority of different tasks, and the moderating role of environmental regulation (ER). The findings show that: (1) FCs lead to higher pollutant emissions, particularly in small firms, and fewer green innovations, particularly in large firms; (2) with the rise of FCs level, small companies are more likely to shift to passive CEB choices combining higher pollution emissions and lower green innovation than large firms; (3) ER increases short-term compliance pressure and reduces pollution emissions for financially constrained companies, but also reduces green innovation. This research offers a detailed comprehension of how financial factors influence a company's strategic decision-making with regards to environmental practices.