Corporate Environmental Performance Research Articles

Climate risk perception and corporate ESG performance: evidence from China

PurposeThis study examines the impact of climate risk perception on corporate environmental, social and governance (ESG) performance from a microfirm perspective.Design/methodology/approachUsing a sample of Chinese listed companies from 2009 to 2021, we constructed corporate climate risk perception indicators based on the Management Discussion and Analysis (MD&A) in the annual reports of the companies, and analyzed it using ordinary least squares regression.FindingsThe results show that climate risk perception improves corporate ESG performance by encouraging green innovation. Heterogeneity analysis suggests that the greater the magnitude of climate risk shocks to the firms, the stronger the risk coping ability and the weaker the environmental regulation, the more pronounced the improvement of climate risk perception on corporate ESG performance. Furthermore, economic consequence analysis shows that the enhancement effect of climate risk perception on corporate ESG performance contributes to increasing corporate value.Originality/valueThis study emphasizes the significance of corporate climate risk perception in enhancing ESG performance. It provides a theoretical basis for enterprises to respond to climate risk and sustainable development.

Can Smart city policies enhance corporate environmental performance? Evidence from China

Can Smart city policies enhance corporate environmental performance? Evidence from China

Seeing is believing: Do face‐to‐face meetings between independent directors and investors enhance corporate ESG performance?

AbstractThis article explores the topic of whether face‐to‐face communication between independent directors and investors can help them obtain firm‐specific information and promote management to improve corporate environmental, social, and governance (ESG) performance. Our findings revealed a notable positive correlation between the frequency of independent directors attending shareholder meetings (IDASM) and ESG performance. The underlying mechanism for this correlation is that IDASM increases investment in research and development (R&D) and green patent applications, which can drive long‐term firm value. Further analysis reveals that independent directors attending annual shareholder meetings can more effectively enhance a company's ESG performance. Independent directors attending shareholder meetings also exhibits a more noticeable impact on improving corporate governance performance than environment performance and social performance. The effect becomes more pronounced when independent directors possess an accounting background, have shorter tenures, when the meetings attended by more minority shareholders, the degree of enterprise information asymmetry is high. The research results have reference significance for improve the information disadvantage position of independent directors, restrain short‐sighted behavior of management, and improving the role of shareholder meetings in protecting investor interests.

Can female CEOs improve corporate environmental, social and governance performance?

Purpose In the context of the severe global challenges posed by climate and environmental issues, this paper aims to explore the connection between female Chief Executive Officers (CEOs) and the level of sustainable development in companies. This study aims to investigate the impact of female CEOs on corporate ESG performance and provide a detailed analysis of the underlying mechanisms. Design/methodology/approach This study uses a sample of listed companies from 2010 to 2021, as reported by Bloomberg. This study uses logit regression models to test hypotheses and conduct robustness tests using the generalized method of moments, propensity score matching and heckman two statge tests. Findings The research findings indicate that female CEOs can enhance a company’s ESG performance, primarily by elevating the level of green innovation and engaging in more philanthropic activities. When environmental uncertainty is high, the risk-averse attitude of female CEOs may diminish the enhancement of ESG performance. However, granting a higher proportion of equity to female CEOs incentivizes risk-taking, thereby strengthening the improvement of ESG performance. Further analysis reveals that the impact of female CEOs on ESG performance is more significant in non-state-owned enterprises, high-pollution industries, and companies with low financing constraints. Research limitations/implications The authors have shown that two key ways in which female CEOs enhance a company’s ESG performance are by increasing the level of green innovation and assuming more social responsibility. Nonetheless, this remains a shortcoming of this work, opening a door for future research to examine and enrich. There may be other possible mechanisms explaining the influence of female CEOs on corporate ESG performance. More research is warranted about the CEO’s additional traits, which were not considered in this study but may have an impact on a company’s ESG performance. Finally, while the analysis has delved into the moderating effects of external factors such as environmental uncertainty and CEO ownership on the influence of female CEOs on corporate ESG performance, there is room for exploring whether other factors also play a moderating role in future studies. Practical implications First, the findings of this study highlight the beneficial societal and economic effects of choosing female CEOs. The inclination to take on social responsibility and care for the environment are both higher among female CEOs. Furthermore, the authors have also discovered that female CEOs possess unique advantages in promoting corporate sustainability and enhancing ESG standards. This can contribute to breaking down stereotypes about gender roles in the workplace. Finally, this research shows that organizational heterogeneity and market risks have an impact on female CEOs’ capacity to improve company ESG performance. Originality/value A significant innovation of this paper lies in its unique focus on the connection between female CEOs and corporate ESG performance, along with the underlying mechanisms. Against the backdrop of sustainable development, the paper integrates social gender theory, upper echelon theory and agency theory into a comprehensive framework, shedding light on the influence of female CEOs on ESG performance and the associated mechanisms.

The Impact of Carbon Emissions Trading on Corporate Environmental Performance--A Hybrid Study Based on PSM-DID and Dual Machine Learning

In the context of "dual carbon", the green economy has gradually become the mainstream trend of economic development. As the main force of social production, the environmental governance behaviour of enterprises is crucial to China's economic transformation. Based on the panel data of Chinese A-share listed companies from 2011 to 2021, this study empirically examines, analyses the mechanism of action, and analyses the heterogeneity of enterprises using the PSM-DID model and the dual machine learning DML model. It is found that the carbon trading pilot policy significantly and positively affects firms' environmental performance, especially for non-state-owned enterprises, non-high-tech and manufacturing industries. In terms of spatial distribution, enterprises in the eastern and central regions are more significantly affected by the carbon trading pilot policy. In addition, the study also finds that executives' green awareness plays a partial mediating role in carbon trading's influence on firms' environmental performance through mediation effect analysis. Finally, the article puts forward recommendations for the government, enterprises and executives to promote the further application and effect of the carbon trading pilot policy in the enhancement of corporate environmental performance.

The interrelationships between corporate political activity and corporate environmental performance: the role of language diversity

AbstractLanguage affects almost every aspect of management in multinational enterprises (MNEs) but little is known about the impact of language on environmental performance. Our study investigates how language diversity affects the environmental performance of MNEs worldwide. We show that the grammatical structure of a language – specifically the first pronoun drop – is an important factor explaining the environmental performance of firms. Our analysis of 4454 company-year observations suggests that MNEs operating in societies that permit the first pronoun drop tend to have better environmental performance. Furthermore, we explore the impact of linguistic structure on the relationship between environmental performance and corporate political activity (CPA). We find that using the first pronoun drop of the local language moderates the influence of CPA on firms’ environmental performance. Our study concludes that international managers must pay greater attention to the neglected role of language in implementing environmental initiatives.

Does industrial agglomeration curb corporate carbon emissions? A perspective of financial constraints

This paper investigates the impact of industrial agglomeration on corporate carbon emissions in China. We measure the extent of industrial agglomeration utilizing distance-based continuous spatial measurement, differentiating between the quantity and scale of agglomeration. Using a panel of 7895 firm-year observations from 2007 to 2019, our findings indicate that regional industrial agglomeration contributes to a reduction in carbon emissions for firms located within those regions. Specifically, this reduction is primarily achieved through the alleviation of corporate financial constraints. We demonstrate that industrial agglomeration facilitates firms in accessing informal finance (e.g., trade credit) more effectively than formal finance (e.g., bank loans). Additionally, we find that the effect of industrial agglomeration on reducing carbon emissions is more pronounced for firms with higher environmental responsibility, while it is diminished in regions with greater marketization. The carbon reduction effect is also more significant for heavily polluting firms and those situated in areas with stricter environmental regulations. Furthermore, our study reveals that the implementation of green credit policies may weaken the carbon reduction effect of agglomeration by limiting access to financial resources. The robustness of our main results is confirmed through the Bartik-IV test and other robustness checks. Taken together, our findings suggest that industrial agglomeration can effectively lower corporate carbon emissions by easing financial constraints, offering valuable insights into strategies for enhancing corporate environmental performance.

The moderating effect of board gender diversity in the environmental sustainability and financial performance nexus

The study investigates the moderating effect of board gender diversity on the relationship between environmental performance indicators (emissions, innovations, and resources) and financial performance. The study adopts a robust research design, drawing on a diverse sample of 6,104 companies operating in various countries. It employs a sophisticated panel data analysis with a fixed-effect model. The findings indicate a significant effect of environmental performance on financial performance. The results also reveal that higher gender diversity on a board is linked to lower returns on assets (ROA). Moreover, there is a positive interaction between management teams, board gender diversity, and financial performance. This study explores the relationship between corporate governance, environmental performance, and financial outcomes, offering practical insights for businesses, policymakers, and stakeholders. It also provides actionable insights for companies to align sustainability practices with financial success, enhancing their environmental stewardship and potentially improving financial performance. Policymakers can use this knowledge to design regulations and guidelines, while stakeholders, including investors and environmental advocacy groups, can use it to make informed decisions. The study's originality lies in its exploration of the moderating impact of board diversity on the relationship between firms' environmental performance and financial performance, using a large sample from different countries. As there is still a lack of consensus on the effect of environmental performance on financial performance, this study contributes to the understanding of corporate governance, environmental responsibility, and financial performance.

Corporate ESG performance and credit misallocation: Evidence from China

Using data from Chinese-listed companies from 2010 to 2020, this paper investigates the impact of corporate environmental, social, and governance (ESG) performance on credit misallocation. We find that ESG performance significantly reduces credit misallocation, which remains robust to various sensitivity tests. Mechanism analysis reveals that ESG reduces credit misallocation by alleviating information asymmetry. This “information supplementary effect” is primarily evident at the firm rather than the macro level. Further discussion reveals a more pronounced impact of ESG in firms with lower profitability and higher market competition, as well as those located in less financially developed regions. However, this impact becomes less salient during periods of credit expansion. Our research highlights the importance of corporate ESG performance in deterring information asymmetry, and provides insights into improving the resource allocation efficiency in the credit market.

Employee stock ownership plans and corporate environmental, social, and governance performance: evidence from China

Employee stock ownership plans and corporate environmental, social, and governance performance: evidence from China

The Impact of Firm-Level Political Risk on ESG Practices: Does CEO Duality Matter?

Although prior studies have probed the determinants of corporate environmental, social, and governance (ESG) performance, limited works have deeply explored the role of firm-level political risk (PRISK) in determining ESG ratings and the moderator role of ownership structure on the PRISK–ESG performance nexus. Thus, this work endeavors to fill the gap by probing the impact of PRISK on aggregate corporate ESG performance and its pillars, namely environmental, social, and governance. In particular, the present study explores whether chief executive officer (CEO) duality has a moderating role between PRISK and ESG performance. Our sample focuses on 350 listed nonfinancial companies operating in the Standard and Poor’s 500 index and performing both Tobit and Poisson panel data estimation methods between 2005 and 2022. Remarkably, we found that PRISK positively affects corporate ESG performance, supporting legitimacy theory. This indicates that a firm with higher political risk exposure prefers to engage more in ESG activities to gain legitimacy, increase its reputation, and achieve corporate success. Furthermore, the findings underscore that an increase in the level of CEO duality leads to a decrease in the positive effect of PRISK on ESG. The findings are robust after considering the various modifications that suggest significant policy implications for corporate executives and policymakers.

Digital Transformation on Corporate Environmental Performance

Digital transformation, as a powerful catalyst for the deep integration of the digital economy and the real economy, has emerged as a crucial driver for enterprise transformation and upgrading, as well as reshaping the competitive landscape. Drawing on data from Chinese A-share listed companies between 2010 and 2019, this study empirically examines the relationship between digital transformation and corporate environmental performance, as well as its underlying impact mechanisms. The findings indicate that digital transformation significantly enhances the level of corporate environmental performance. Moreover, corporate digital transformation facilitates the improvement of environmental performance by enhancing green technology innovation capabilities and optimizing production structures. The positive impact on environmental performance is particularly pronounced in state-owned enterprises, high-growth companies, those with substantial research and development investments, and those garnering high analyst attention.

Organizational sensemaking and environmental performance: A longitudinal study of publicly traded firms' sustainability reports

AbstractEnvironmental strategy research has often used organizational interpretation as a key lens for understanding how firms engage in sensemaking around natural environmental issues and environmental performance. This work has rarely empirically tested the proposed relationships of organizational interpretation in firms' sensemaking around environmental issues nor the relationship between firms' environmental sensemaking and environmental performance. We empirically test this relationship, capturing environmental sensemaking through computer‐aided text analysis (CATA) of published sustainability reports, and environmental performance with the Trucost environmental dataset. Mixed‐effects general linear modeling on a bespoke longitudinal dataset of 117 publicly traded companies from 2005 to 2018 reveals the three stages of the organization interpretation model of sensemaking—scanning, interpreting, and responding—align as expected. We also find firms' environmental scanning relates with year‐over‐year improvement in environmental performance, yet environmental interpreting correlates with worsening environmental performance. Additionally, larger firms and firms in industries with high carbon emissions gather more environmental data and exhibit more extensive environmental interpreting. This research provides insight for scholars by testing environmental sensemaking and exploring the boundary conditions of sensemaking and performance, and for practitioners and policymakers by offering a new framework for analyzing and interpreting sustainability reports and corporate environmental performance.

Building Integrity, Protecting The Environment: The Influence Of Anti Corruption Commitment On Corporate Environmental Management Performance In Southeast Asia

Building Integrity, Protecting The Environment: The Influence Of Anti Corruption Commitment On Corporate Environmental Management Performance In Southeast Asia

Does corporate green innovation unlock financial doors? The mediating role of environmental performance

Purpose This study aims to respond to the latest research calls to precisely revisit the nexus between corporate green innovation (CGI) and financial decisions through deeply investigating the mediating effect of corporate environmental performance measured by the effectiveness of emission reduction. Design/methodology/approach This study analyzes nonfinancial-listed firms on the Australian Securities Exchange from 2002 to 2019 using multiple regression analysis on a panel data set. Initially, different static panel data approaches were used. To account for the potential endogeneity issue and generate robust outcomes, the authors apply the one-step system generalized method of moment, two-stage least squares and lagged model approaches. Findings The results provide a clear indication that the practices of green innovation can favorably contribute to the level of environmental performance, which in turn affect the firm’s ability in opening the new financial doors and shape solid capital structure. In this context, the effective environmental performance fully mediates the nexus between CGI and capital structure of a firm. More importantly, the outcomes are robust and coherent across different estimation techniques. Originality/value The originality of this study lies in its utilization of mediation analysis to explore the relationship between CGI and a firm's financial structure. This approach distinguishes it from previous research by offering a thorough and nuanced understanding of how green innovation practices influence the financing decisions of a firm.

Corporate environmental performance under the pressure of government environmental information disclosure

Prior research suggests that government regulations play an important role in corporate environmental performance (CEP). We investigate the role of government environmental information disclosure in CEP. Using a sample from the period 2008–2018 from China, we find strong evidence that government environmental information disclosure promotes CEP. The results are robust after a series of tests. We also find that analysts’ coverage and media coverage play an attenuating role in the relationship between government environmental information and CEP.

Executives’ green experience and corporate ESG performance: Do government subsidies matter?

This paper innovatively explores the impact of executives’ green experience on corporate environmental, social, and governance (ESG) performance, simultaneously highlights the moderating role of government subsidies. Using data on Chinese listed companies from 2009 to 2022, we find that companies hired executives with green experience perform better in ESG, and the positive effect of executives’ green experience is more pronounced in non-high-tech industries and eastern region. Specifically, education and practice experience both have contribution, and the education experience effects greater. In addition, we reveal the positive moderating role of government subsidies.

Climate transition risk and corporate environment, social and governance performance: Evidence from Chinese listed companies

AbstractUsing a sample taken from Chinese A‐share listed companies from 2010 to 2020, we explore the effect of climate transition risk on corporate environment, social and governance (ESG) performance. Our finding shows that climate transition risk promotes corporate ESG performance. In addition, we discover that equity incentives play an important positive moderating role in the above relationship. Compared with positive media tone, the positive effect of climate transition risk on corporate ESG performance is more significant under the moderating effect of a negative media tone. Further analyses find that there exists a more prominent relationship between climate transition risk and corporate ESG performance in non‐state‐owned enterprises, enterprises with more female directors, and enterprises in highly market‐oriented regions. Our findings provide a reference to improve ESG practice to achieve corporate sustainable development and provide practical suggestions for better dealing with climate transition risk.

Environmental and social performance relationships to firm efficiency: Evidence from the semiconductor industry

Escalating global demand for high-performance computing and smart devices has driven rapid expansion in the semiconductor industry. This expansion raises environmental and societal sustainability concerns among stakeholders. Although there is a growing commitment to environmental and social responsibilities by semiconductor companies, the impact of these responsibilities and initiatives on corporate performance remains unclear—especially with respect to general firm operational efficiency. Thus, this study employs a sample of 129 listed Chinese semiconductor companies and a slack-based data envelopment analysis (SBM-DEA) methodology to examine the relationship between corporate environmental and social performance and firm efficiency. We also investigate how supply chain position—an important industrial characteristic—moderates these relationships. The findings reveal that: (1) China's semiconductor industry efficiency is relatively low, particularly in the chip design sub-sector; (2) there is a positive relationship between corporate environmental performance and firm efficiency; and (3) supply chain position moderates the relationship between both corporate environmental and social performance and firm efficiency. These findings offer important implications for managers and researchers aiming to foster greater semiconductor industry sustainable development.

Climate clubs and firm environmental performance: A regional institutional perspective

This research focuses on informal club-based institutions to boost a firm's engagement in environmental practices. Specifically, we investigate the effect of a firm's climate club membership on its corporate environmental performance. Our empirical analyses rely on a sample of firms from 142 Western European regions during 2011-2019. Results show that stronger climate club engagement of firms within a same region of a focal firm may act as an informal institution, improving the latter's environmental performance. We also find that the impact of those informal club-based institutions outsizes the effect exerted by the quality of formal regional institutions, and that strong informal climate club-based institutions might be able to partly replace the role of regional formal institutions in that ESG domain. Finally, we delve into several mechanisms potentially driving the observed impacts of regional formal and informal institutions on firms’ environmental performance.