The relationship between environmental performance and financial performance in Chinese manufacturing company

Abstract

This study is to examine the relationship between company’s environmental performance and corporates’ financial performance. The article examined the data of 29 Chinese manufacturing listed company between 2012–2018 to investigate the impact of environmental performance on firm’s financial performance. The CSMAR database was used to collect the data of firm performance which is measured by Tobin’s Q and return on equity (ROE) ratios. The outcome of the panelbased regression models reveals that the environmental performance has a positive and significant influence on a firm’s financial indicators. Moreover, the enterprise size also strongly affects the financial performance. However, the region and industry dimensions have a negative influence on firm performance. These results imply that, under the government's increasingly strict control of the environment, if Chinese manufacturing company wants to develop in the long run and gain the recognition of various stakeholders, it must attach importance to environmental performance management and improve the company's resource usage efficiency and technological innovation level, and thereby improve financial performance.