Corporate Environmental Performance Research Articles

Impact of Corporate Culture on Environmental Performance

AbstractWe examine the impact of corporate culture on environmental performance using a sample of 7199 firm-year observations over the period of 2002–2018. We find that stronger corporate culture improves environmental performance, measured by the amount of toxic chemical release (TCR). Our result is both statistically and economically significant. We also show that cultural norms of innovation, quality and teamwork as well as a technology-oriented corporate culture have a greater impact on enhancing environmental performance. Further analyses show that managerial competence and strong institutional ownership moderate the relationship between corporate culture and environmental performance. We introduce the decomposition of expected and unexpected components of TCR and document that firms with a strong corporate culture implement strategies to reduce the unexpected component of TCR in addition to the expected component of TCR. Finally, we document that strong corporate culture and environmental performance improve firms’ financial performance. Our results are robust to several sensitivity tests and procedures to mitigate endogeneity and self-selection problems. From a practical point of view, our findings suggest that a firm’s culture can determine its environmental sustainability and ethical practices.

Government subsidies and corporate environmental, social and governance performance: Evidence from companies of China

AbstractEnvironmental, social, and governance (ESG) performance is crucial for companies to attain sustainable development, which is a key reference for assessing the value and growth potential of a company. Government subsidies can provide incentives for companies to prioritize environmental preservation, meet their social duties, and improve their governance performance. This paper empirically examines the effects and mechanisms of government subsidies on corporate ESG performance, using an Ologit multiple ordered regression model based on data from Chinese listed companies. We find that not only do total government subsidies significantly improve firms' ESG performance, but both environmental and non‐environmental subsidies also have the similar effect, albeit with different impact mechanisms. The analysis of the mechanism suggests that government subsidies can enhance corporate ESG performance by promoting green innovation, alleviating financing constraints, increasing charitable donations, and attracting social attention. This paper holds significant practical value as it presents empirical findings as a basis for reforming China's subsidy policies, showcasing the actual impact of diverse subsidy policies and the heterogeneity.

Can green credit policy increase corporate pollution abatement efforts? Evidence from China

Based on the green credit policy enacted in China since 2012, our study examines the monitoring role of banks in promoting corporate pollution abatement. The results show that the green credit policy has a significantly positive effect on corporate green innovation for polluting firms. Furthermore, we find that the positive effect is more pronounced when banks substitute institutional investors and media to monitor corporate environmental performance, in the product market of intense peer competition, and in regions where environmental regulatory enforcement is strong. These results suggest that the green credit policy strengthens the monitoring force of banks, thus promoting corporate green transformation and development.

The productivity paradox in carbon‐intensive companies: How eco‐innovation affects corporate environmental and financial performance

AbstractEmpirical studies analyzing the relationship between strategies to reduce greenhouse gas (GHG) emissions and firms' environmental and financial performance often fail to find significant effects when firms invest in innovative green technologies. Indeed, as efficiency and productivity gains of new technologies can often be reaped only after a certain time gap, cross‐sectional studies are bound to ignore the time component, thus becoming subject to the productivity paradox. Employing an integrative approach, drawing on eco‐efficiency theory, productivity paradox, and innovation diffusion principles, this longitudinal study observes companies with high GHG emissions during and after the first two European Union Emission Trading Scheme (EU ETS) trading periods (2005–2019). It analyzes (1) the dynamics of carbon reduction practices over time, (2) the impact of GHG reduction strategies on environmental performance, (3) the positive effect of GHG‐related efficiency improvements on firm performance, while considering (4) the moderating effect of GHG emissions type on the latter relationship.

Before thrive, first survive: The impact of controlling shareholder pledging on corporate ESG performance

This paper investigates the impact of controlling shareholder pledging on corporate environmental, social, and governance (ESG) performance. Using data from Chinese listed firms, we show that controlling shareholder pledging significantly weakens firms' ESG performance and that this effect is robust to endogeneity and the choice of ESG metrics and controlling shareholder pledging measures. In addition, we show that the main channel through which ESG performance deteriorates for firms with controlling shareholder pledging is the risk of losing control. The adverse impact of controlling shareholder pledging on ESG is much less when control rights are not at risk. On the other hand, limited resources (e.g. tunnelling and financial constraints) contribute little to the impact. Our further analyses demonstrate that internal monitoring mechanisms can mitigate the negative impact of controlling shareholder pledging on corporate ESG performance, but external monitoring mechanisms cannot.

CEO gender, critical mass of board gender diversity and ESG performance: UK evidence

PurposeThis study investigates the relationship between CEO leadership, gender homophily and corporate environmental, social and governance (ESG) performance. We also investigate whether it is essential to have a critical mass of women directors on the board to create a significant power of gender diversity in leadership positions.Design/methodology/approachOur study is based on firms listed on the London Stock Exchange (FTSE-All-Share) from 2011 to 2019. CEO characteristics and other board variables were collected from BoardEx, and ESG data, and other related variables were collected from Eikon database.FindingsWe find a critical mass of female directors contributes to ESG performance suggesting that token representation of female directors on boards limits their effectiveness. We do not find support for the gender homophily perspective, our findings suggest that the effectiveness of female CEOs does not depend on the existence of a critical mass of female directors. Female directors and female CEOs are less likely to be associated with ESG activities when firms experience poor financial performance. We also find that younger female CEOs have a positive impact on ESG performance. Furthermore, we find female CEOs with shorter tenure are more likely to improve ESG performance. Overall, our findings suggest a substitutional effect between having female CEOs and gender diverse boards.Originality/valueThis study contributes to the debate on gender homophily in the boardroom and how that may affect ESG practices. It also complements existing academic research on female leadership and ESG performance and has important implications for senior management and policymakers.

The Impact of ESG Responsibility Performance on Corporate Resilience

Against the backdrop of an increasingly complex and uncertain external corporate environment, how to quickly adjust and recover from external risk shocks and challenges by improving corporate environmental, social, and governance (ESG) responsibility performance has become key to achieving sustainable growth for companies today. Although emerging concepts, such as ESG and corporate resilience have received widespread societal attention, exactly how ESG responsibility performance can enhance development resilience has yet to be sufficiently explained. To this end, this paper explores the mechanisms and characteristics of corporate ESG responsibility performance on corporate resilience, using a sample of 4,527 A-share listed companies selected for the ESG rating by China Securities from 2009 to 2021. The study finds that: Firstly, the better the ESG responsibility performance, the more resilient the companies; each unit increase in ESG rating increases the economic value added (EVA) rate of total assets by 0.63% and reduces the risk of corporate bankruptcy by 0.32%, thus increasing corporate resilience. In addition, all three ESG sub-indicators contribute to the improvement of corporate resilience, with corporate governance rating having a more significant impact on corporate resilience. Secondly, the mechanism analysis shows that the level of the investor interaction, intensity of strategy investment, and quality of the government–business relationship play a moderating role in the process of ESG responsibility performance affecting corporate resilience. Thirdly, certain heterogeneous characteristics of ESG responsibility performance affect corporate resilience. Fourthly, there is a lag in the impact of ESG responsibility performance on corporate resilience, with the impact largely disappearing after a four-period lag.

Informal board hierarchy and corporate ESG performance

AbstractAgainst the backdrop of driving global economic sustainability, corporate Environmental, Social, and Governance (ESG) performance has gradually emerged as a crucial theoretical and practical concern. This study aims to enrich the theoretical understanding of the correlation between corporate governance and ESG. Notably, the theoretical contribution is based on the relational contract theory, indicating the significance of the informal structure and implicit characteristics of the board of directors for corporate ESG performance. Using Chinese listed firms as samples, this study empirically examines and reveals a positive correlation between the informal board hierarchy and corporate ESG performance. Moreover, based on theoretical deduction, this study identifies internal control, innovation efficiency, and financial performance as important mechanisms through which the informal board hierarchy promotes corporate ESG performance. Further analysis indicates that in firms characterized by higher board interaction, lower shareholding concentration, and the combination of the roles of chairman and CEO, the promoting effect of the informal hierarchy on corporate ESG becomes significantly more pronounced. Our findings contribute to the understanding of relational contract theory in the field of corporate sustainability, enriching the literature on corporate governance and ESG, and providing decision‐making references and practical insights for optimizing corporate development.

The Impact of Green Mergers and Acquisitions on Corporate Environmental Performance: Evidence from China’s Heavy-Polluting Industries

This study examined the impact of green mergers and acquisitions (green M&As) on corporate environmental performance. Applying the Differences-in-Differences (DID) model to a sample of Chinese heavy-polluting-industry companies listed on the Shanghai and Shenzhen stock exchanges from 2010 to 2022, our study results show that the adoption of green M&As by the listed Chinese heavy polluters can lower corporate environmental capital expenditure and significantly improve corporate environmental performance. Meanwhile, the positive effects of green M&As on environmental performance are also found to be stronger for state-owned enterprises, young enterprises, and enterprises located in areas with low financial investments in energy efficiency and environmental protection, according to a heterogeneity study conducted for this paper. The analysis of mediating effects shows that the green M&A of heavily polluting firms will have a catalytic effect on the improvement of firms’ environmental performance by promoting their green technological innovation and, in turn, their environmental performance. Furthermore, the moderating effect analysis demonstrates that the quality of the firm’s internal controls and the CEO’s prior environmental experience are both factors that can support the beneficial impact of green M&A on the enhancement of the firm’s environmental performance. This paper enriches the theoretical research system of green M&A and green investment driving mechanisms, and at the same time provides empirical support and strategic reference for the green strategy decision of heavy-polluting enterprises.

Board skill diversity and corporate environmental responsibility: the moderating effects of formal and informal pressures

Purpose This study aims to investigate the impact of board skill diversity (BSD) on corporate environmental responsibility (CER). In addition, this study explores the moderating effects of formal regulatory pressure and informal media pressure. Design/methodology/approach This study uses Chinese high polluting companies as the sample and uses regression analysis. Robustness checks, including instrumental variable regression, Heckman two-stage model and propensity score matching method, are performed to test the robustness of the results. Findings The findings suggest that BSD significantly improves CER performance. Both formal regulatory pressure and informal media pressure strengthen the positive impact of BSD on CER. Further channel analyses reveal that BSD improves CER performance by promoting corporate proenvironmental behaviors rather than by restricting environmental violations; skill diversity of executive directors has a more significant effect on CER than that of independent directors. Finally, the moderating effect of regulatory pressure is only significant after the implementation of the Environmental Protection Law, and the moderating effect of media pressure mainly concentrates on negative media coverage. Practical implications The involvement of directors with more diverse skills is essential to improve corporate proenvironmental behaviors. Companies should select qualified directors with different skills to further improve their performance on environmental protection and sustainable development. Social implications Regulators and standard-setters should develop efficient guidelines on corporate board governance to enhance the positive role of companies in environmental and sustainable development. Originality/value This study broadens the research on the determinants of CER by examining the influence of BSD on CER and the moderating roles of various stakeholder pressures, thereby providing a deeper understanding of corporate environmental performance and sustainable development.

Research on the Relationship between ESG Performance and Performance of Listed Companies under the Dual Carbon Target-the Mediating Effect Model Based on Internal Control

Under the guidance of the dual-carbon goal, the relationship between corporate environmental, social and governance (ESG) performance and performance has received increasing attention. This study uses internal control as an intermediary variable to analyze the interaction mechanism between ESG performance and corporate performance. This paper selects the data of Shanghai and Shenzhen listed companies in the past ten years for analysis, and uses multiple regression models, intermediary effect models and other methods to empirically test the direct impact of ESG performance on corporate performance and the indirect impact through internal control. The research finds that good ESG performance can promote the improvement of corporate performance, and good internal control can strengthen corporate governance, and then effectively regulate ESG performance and corporate performance, thus indirectly promoting the improvement of financial performance. This study proves the importance and necessity of optimizing enterprise ESG performance and strengthening enterprise internal control to promote high-quality sustainable development of enterprises in the context of dual-carbon. This study provides a theoretical basis and practical guidance for enterprises to achieve a win-win situation of economic benefits and social responsibility while pursuing sustainable development.

Determinants of corporate environmental performance and the moderating effect of economic crises

PurposeThis paper aims to identify the effect of environmental management systems (EMSs), commitment to stakeholders and gender diversity on corporate environmental performance (CEP) and the extent to which an economic crisis moderates these relationships.Design/methodology/approachA regression analysis was conducted on a sample of 14,217 observations from 1,933 firms from 26 countries from 2002 to 2010. The estimator used is ordinary least squares with heteroscedastic panel-corrected standard errors (PCSEs), which allows us to obtain consistent results in the presence of heteroscedasticity and autocorrelation.FindingsThe results show that EMSs and stakeholder engagement are mechanisms that drive CEP but lose their effectiveness in times of crisis. However, the presence of women on boards has a positive effect on CEP that is not affected by an economic crisis.Research limitations/implicationsThe study has some limitations that could be addressed in the future. We present board gender diversity as a governance mechanism because its role is strongly related to non-financial performance. Future studies could focus on other corporate governance mechanisms, such as the presence of institutional or long-term investors. In addition, other mechanisms could be found that can counteract poor environmental performance in times of crisis. Finally, it might be useful to contrast these results with the crisis generated by the coronavirus pandemic.Practical implicationsThe results obtained have important practical implications at the corporate and institutional levels. At the corporate level, they highlight, as essential contributions, that environmental management systems and stakeholder orientation are not effective in times of economic crisis, except for with the presence of women on the board.Social implicationsFollowing the crisis, the European Commission has promoted gender diversity on boards as a mechanism to improve the governance of entities – improving, among other aspects, sustainability. In this sense, another one of the practical implications of the study is support for the policies that the European Union has implemented over the last two decades.Originality/valueThe paper analyses how a crisis affects the moral and cultural institutional mechanisms that promote CEP. Gender diversity on the board of directors not only promotes environmental performance but also appears to be a governance mechanism that ensures this performance in times of crisis when the other mechanisms lose their effectiveness. The study proposes specific policies that help maintain environmental performance in an economic crisis.

Can government subsidies improve corporate ESG performance? Evidence from listed enterprises in China

The corporate environmental, social, and governance (ESG) performance of businesses is crucial for the sustainable development of our evolving global economy. This study analyzes the mechanisms through which government subsidies influence ESG performance in corporations. The findings reveal that government subsidies significantly improve corporate ESG performance. Furthermore, government subsidies enhance corporate innovation investments and mitigate managerial myopia, leading to improved ESG performance in companies. Additional research indicates that in firms with lesser political connections and greater industry competition, the impact of government subsidies in elevating corporate ESG performance is more significant.

Environmental protection tax law and corporate ESG performance

We analyze the bond between environmental protection tax law (EPTL) and corporate environmental, social, and governance (ESG) performance and explore the mediating role of corporate green technological innovation between the two. The study reveals a significant positive correlation between implementing EPTL and corporate ESG performance, with corporate green technological innovation acting as an intermediary. Furthermore, we find heterogeneity in the influence of EPTL on corporate ESG performance, which is primarily concentrated in non-state-owned enterprises. This study's conclusions remain valid after robustness and parallel trend tests.

Does financial liberalization promote corporate environmental performance? Evidence from foreign banks' entry into China

Does financial liberalization promote corporate environmental performance? Evidence from foreign banks' entry into China

Corporate environmental governance under the coordination of fiscal and financial policies: The case of green credit subsidy policy

This study analyzes data from China's A-share non-financial listed firms (2009–2020) using a DID model to assess how green credit subsidy policies affect corporate environmental performance. Findings show significant performance improvements in heavily polluting companies, attributable to enhanced innovation and reduced operational costs, as confirmed by robustness tests. The policy's impact is more significant on non-state, small and medium-sized, and companies in less developed regions.

The impact of the energy-consuming right trading system on corporate environmental performance: Based on empirical evidence from panel data of industrial enterprises listed in pilot regions

The energy-consuming right trading system (ECRTS) is a significant institutional innovation in China to address the increasingly severe energy crisis and environmental issues. Identifying the policy effects of energy consumption rights on corporate environmental performance (CEP) is conducive to achieving a win-win situation for China's economic growth and carbon neutrality. This study aims to analyze the impact of energy-consuming right trading system on corporate environmental performance and provide empirical evidence and policy implications for the full implementation of future policies. Using data from Chinese listed industrial enterprises from 2012 to 2019 and adopting the difference-in-differences method and mediation analysis, we empirically analyze the policy effects of energy-consuming right trading system. We find that the energy-consuming right trading system significantly promotes the improvement of corporate environmental performance, and the conclusion remains valid after a series of robustness tests. Further mechanism examinations indicate that the system mainly enhances environmental performance by affecting corporate green technological innovation. Heterogeneity tests suggest that the energy-consuming right trading system has a stronger impact on companies in economically developed regions, non-state-owned enterprises, and those with higher asset flexibility. Our research results can aid in the green transformation of enterprises and provide practical evidence for China to accelerate the comprehensive construction of the energy consumption rights trading market.

Carbon reduction and corporate sustainability: Evidence from low-carbon city pilot policy

The enhancement of corporate environmental, social, and governance (ESG) performance represents a crucial aspect of the broader green transformation agenda. Using a DID design, this paper examines the impact of China's low-carbon city pilot (LCCP) policy on the corporate ESG performance. Our findings demonstrate that the construction of LCCP exerts a positive influence on corporate ESG performance in pilot regions, particularly in industries and areas with high carbon emission intensity. Channel analyses reveal that LCCP policy heightens the environmental concerns of local governments and the public. Furthermore, LCCP policy has a crowding out effect with firms located in the surrounding cities. This paper responds to the calls for the determinants of ESG and enriches the understanding of policy impacts on corporate sustainability practices.

Are women greener? Board gender diversity and corporate green technology innovation in China

This article investigates how board gender diversity impacts corporate green technology innovation, and whether regional gender contexts as well as corporate financial constraints moderate this relationship. Using a panel of 20,834 firm-year observations of China, the results indicate a statistically significant positive association between board gender diversity and corporate green technology innovation. Specifically, the study finds that boards with three or more female directors have a stronger positive effect on green technology innovation than boards with two or fewer female directors, in line with the critical mass theory. Besides, the result shows that the effect of female executive directors outweighs that of female independent directors. Further, the positive association between female directors and green technology innovation is found to be more pronounced in firms located in regions with higher levels of gender equality and higher proportions of women in politics, while financial constraints act to alleviate the extent of the positive relationship. Additionally, female directors play a potent role in reducing corporate carbon emissions, particularly for high-polluting firms and those located in regions with stricter environmental regulation. The key results remain unchanged after correcting for endogeneity concern. Overall, this study has substantial practical implications and provides valuable insights for managers and policymakers regarding the contribution of female leadership in enhancing corporate environmental performance.

The Influence of Corporate Governance, Leverage and Environmental Performance on Firm Value (Case Study of Plantation Subsector Companies Listed on the Indonesia Stock Exchange 2014-2022)

The decline in company value amidst high demand for domestic palm oil is interesting to study. The research was conducted to determine the influence of the Independent Board of Commissioners, Managerial Ownership, Audit Committee, Leverage and Environmental Performance on Company Value as measured by Tobins'q with Company Size as a control variable. The object of the research is the agricultural plantation subsector listed on the Indonesia Stock Exchange (BEI) in 2014-2022. This research uses secondary data obtained from the IDX and company websites. Determining the sample using purposive sampling found 16 companies. Data analysis uses panel data regression using the Eviews 12 analysis tool. The research results partially show the influence of Managerial Ownership on Company Value. The Independent Board of Commissioners and Audit Committee do not influence Company Value. New findings on the Environmental Performance and Leverage variables have a negative effect on Company Value. Independent variables simultaneously influence Company Value.