Impacts of Industrial Heterogeneity and Technical Innovation on the Relationship between Environmental Performance and Financial Performance

Abstract

In this paper, we investigate the relationship between environmental performance (EP) and financial performance (FP) from the perspective of technical innovation in Chinese industrial sectors. We also consider industrial heterogeneity and take temporal variations of the link into account. We collect the required data from different Chinese statistical yearbooks from 2004 to 2015. We use an aggregated index of environmental pollutants as a proxy for EP and return on assets as a proxy for FP, and we employ research and development expenditure to capture technical innovation. The empirical results indicate that industrial heterogeneity exists and the EP-FP link varies in different industrial groups. There is no evidence that the EP-FP link becomes more positive and more significant over time. Furthermore, the mediation effect of technical innovation and environmental pressures can jointly affect the link. Finally, technical innovation partially mediates the EP-FP link but only in Chinese light-polluting sectors not in heavy-polluting sectors. The mediating role of technical innovation has a great impact on shaping the EP-FP link. When technical innovation partially mediates the focal link, apart from the indirect link, the direct EP-FP link is likely to be positive. If not, the direct EP-FP link is likely to be negative.

Can environmental investments benefit environmental performance? The moderating roles of institutional environment and foreign direct investment

“…Therefore, the number of pollution emissions is frequently employed to measure EP. Some scholars have directly used the publicly released data on the amount of pollution emissions to measure EP, such as the intensity of industrial waste emissions (Trumpp & Guenther, 2015), greenhouse gas emissions (Alam et al, 2019), or comprehensive index calculated on the basis of various types of pollution emissions (Li & Ramanathan, 2018a; Li & Ramanathan, 2018b), among others. Some scholars also use the databases developed by the third independent parties to capture EP, such as Toxic Release Inventory (Cordeiro & Sarkis, 1997), Kinder, Lydenberg, and Domini index (Delmas, Nairn‐Birch, & Lim, 2015), Council on Economic Priorities rankings (Bragdon & Marlin, 1972), Britain's Most Admired Companies (Elsayed & Paton, 2009), European Pollutant Release and Transfer Register (Testa et al, 2014), among others.…”

Promoting or Inhibiting? The Impact of Environmental Regulation on Corporate Financial Performance—An Empirical Analysis Based on China

“…To study the impact of NEPL on the financial performance of the enterprises, we establish the following models based on [48][49][50][51] to carry out the empirical analysis:…”

“…As for the discussion of heterogeneity, the existing studies mainly emphasize the impact of industry heterogeneity and regional heterogeneity [48,49], and rarely analyze it from the perspective of ownership. However, previous studies indicate that the effect of policies may be affected by the heterogeneity of ownership, and enterprises with different ownership backgrounds may have different responses to policies [5,50,51].…”

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“…In the signal theory, corporate social responsibility can convey information about sustainable strategies to all stakeholders, and represent the firms’ actual activities for environmental protection and social contribution [8]. Compared with other industries, corporate social responsibility performance of high-polluting firms can contain more information about corporate practices in environmental protection [12]. Therefore, high-polluting firms are willing to use technological innovation to support corporate practices in social contribution, and obtain more environmental benefits [13].…”