Environmental responsibility, market valuation, and firm characteristics: Evidence from China

Abstract

Using a large panel of listed firms in China from 2010 to 2015, this study investigates the valuation effect of corporate environmental responsibility (CER) and firm characteristics that influence such an effect. We implement the ordinary least squares and the fixed effects panel regressions as well as the two‐stage least squares regressions that control for potential endogeneity. We find that CER has a significantly positive effect on firm performance. The positive effect is more pronounced for firms in highly polluting industries, with high asset tangibility and with low state ownership. Furthermore, firms with high ownership concentration and low managerial ownership tend to benefit more from their environmentally responsible activities, suggesting that enhanced environmental engagement may serve as a strategic tool in reducing the negative effects of agency cost and weak corporate governance on firm valuation. Our results are robust to alternative measures of performance (Tobin's Q and return on assets).

Do CSR Ratings Converge in China? A Comparison Between RKS and Hexun Scores

“…In this paper, a comparative and quantitative analysis was performed for the period 2010-2017, and the following results were obtained: (1) Based on a comparison of the rating methods, information sources, and other factors, RKS is more suitable for measuring the CSR disclosure quality, while Hexun is more suitable for measuring the CSR performance; (2) based on a Spearman correlation analysis, the convergent validity between these two scores is very low, particularly after 2013; and (3) the sub-indicator weights of the RKS system always maintain a high stability, whereas those of the Hexun system suffer from severe fluctuations starting in 2013.Sustainability 2019, 11, 3921 2 of 20 mechanisms of economic consequences [20][21][22][23], the drivers of CSR performance [24][25][26][27][28][29], and economic consequences [30][31][32][33][34][35]; and (2) the HX score is used only as a proxy for the CSR performance level, such as in research on the drivers of CSR performance [36][37][38][39][40] and the economic consequences of CSR performance [19,33,[41][42][43]. Some studies even use the level-1 sub-indicator of the HX score, the environmental dimension HXE, to score a firm's environmental performance level [44,45].Sustainability 2019, 11, x FOR PEER REVIEW 2 of 21 also for CSR performance levels, such as in research on the drivers of CSR disclosure quality [16][17][18][19], the mechanisms of economic consequences [20][21][22][23], the drivers of CSR performance…”

“…Some studies even use the level-1 sub-indicator of the HX score, the environmental dimension HXE, to score a firm's environmental performance level [44,45].Sustainability 2019, 11, x FOR PEER REVIEW 2 of 21 also for CSR performance levels, such as in research on the drivers of CSR disclosure quality [16][17][18][19], the mechanisms of economic consequences [20][21][22][23], the drivers of CSR performance [24][25][26][27][28][29], and economic consequences [30][31][32][33][34][35]; and (2) the HX score is used only as a proxy for the CSR performance level, such as in research on the drivers of CSR performance [36][37][38][39][40] and the economic consequences of CSR performance [19,33,[41][42][43]. Some studies even use the level-1 sub-indicator of the HX score, the environmental dimension HXE, to score a firm's environmental performance level [44,45].…”

The impact of the amount of environmental information disclosure on financial performance: The moderating effect of corporate internationalization

“…This study shows that CEID has a negative impact on CFP. Inspired by Lioui and Sharma (2012) and Hu, Wang, and Xie (2018), the study considers that there may be other factors affecting the relationship between the two. This study selects CI as the moderating variable and finds that company internationalization can positively moderate the relationship between CEID and CFP.…”

Social determinants of sustainability: The imprinting effect of social class background on corporate environmental responsibility

“…Firstly, it is a prosocial behaviour for stakeholders and other individuals. As a strategic response to social responsibility or stakeholder demands, firms can increase investment in environmental protection in order to reduce the negative environmental impact of a firm (Hu, Wang, & Xie, 2018). Second, CER may be an “environmental marketing” strategy (Varadarajan, 1992).…”