Business strategy and firm efforts on environmental protection: Evidence from China

Abstract

Although business strategy plays a fundamental role in firm operations, whether and how business strategy affects firms' environmental protection behaviors remain unclear. On the basis of a typical emerging market, we show that firms following prospector strategies take more environmental protection actions than do those following defender strategies. Our findings are robust to endogeneity checks and alternative measures of business strategy. We further find that prospectors engage in more environmental activities than do defenders when the degree of financial constraint or earning management is high. Our results are particularly pronounced in state-owned enterprises, heavy-polluting industries, and firms located in regions with strict environmental regulations. Overall, this study provides clear policy implications for regulators concerned with environmental protection.

Do foreign institutional investors drive corporate social responsibility? Evidence from listed firms in China

“…Our sample is constructed based on whether firms disclose CSR or sustainability reports and receive CSR performance scores, which may potentially introduce sample selection bias because not all firms disclose their CSR information and sustainability reports (Kong, Yang, Liu, & Yang, 2020). To alleviate such concerns, we employ the Heckman (1979) two‐step procedure to check whether our result is robust to this selection bias.…”

“…To perform this test, we first carry out a probit regression model, as shown in equation (2), to estimate the likelihood that firms issue CSR reports and receive CSR performance scores, to obtain the Inverse Mills Ratio (known as Lambda ), the self‐selection parameter, and in the second‐stage regression, we insert Lambda in the model specification as shown in equation (3): where CSRD is an indicator variable set to 1 if a firm issues a CSR report and receives a CSR rating in a given year, and 0 otherwise. Mandatory is used to measure the probability of whether a sample can be observed, and is defined as a dummy variable equal to 1 if a firm is mandated to disclose a CSR report in a given year, and 0 otherwise (Chen, Hung, & Wang, 2018; Kong et al., 2020). According to prior research, Mandatory affects firm‐level CSR but has no direct impact on the presence of QFIIs.…”

Business strategy and sustainable development: Evidence from China

“…Second, the framework can be operationalized with archival data, which makes data available. Finally, the framework has been widely used to study the economic consequences of business strategy and proved to be valid and robust in the setting of China (e.g., Chen & Keung, 2019; Kong et al, 2020).…”

“…Yuan, Lu, Tian, and Yu (2020) document that prospectors take more CSR than defenders, especially in stakeholder‐ and third‐party‐related CSR areas. More specifically, prospectors take more environmental protection actions and cause less environmental pollution than defenders (Kong, Yang, Liu, & Yang, 2020).…”

“…The existing literature mainly focuses on the effect of business strategy on financial performance, such as bonus contracts (Ittner et al, 1997), financial reports (Bentley et al, 2013; Lim et al, 2018), and audit reports (Chen et al, 2016). In addition, some studies focus on CSR (Galbreath, 2010; Yuan et al, 2020) and environmental protection (Kong et al, 2020) concerning stakeholders and sustainable development. We focus on green innovation which is a relatively direct and important way to realize sustainable development and extend the business strategy literature.…”