The governance and financial impact of green initiatives: Evidence from China’s heavy-polluting industries
DOI:
https://doi.org/10.15282/jgi.9.1.2026.14016Keywords:
Green initiatives, Corporate financial performance, Heavy-polluting industries, Corporate governance, ChinaAbstract
This study investigates the effects of four green initiatives, green investment, green innovation, green subsidies, and green certification, on corporate financial performance in China’s heavy-polluting industries. Using panel data from Chinese A-share listed firms from 2011 to 2023, we examine whether these green initiatives improve financial outcomes under strong environmental regulation and institutional pressure. The findings indicate that all four initiatives are positively associated with corporate financial performance, suggesting that environmental strategies serve not merely as compliance-driven responses, but as strategic governance tools that enhance firm performance. These results underline the critical role of green initiatives in corporate governance by improving resource allocation, reducing compliance risks, and fostering stakeholder trust. Ultimately, this study contributes to the literature by offering a differentiated analysis of green initiatives and providing practical implications for managers and policymakers seeking to align environmental responsibility with financial sustainability.
References
Aguilera, R. V., Rupp, D. E., Williams, C. A., & Ganapathi, J. (2007). Putting the S back in corporate social responsibility: A multilevel theory of social change in organizations. Academy of Management Review, 32(3), 836–863. https://doi.org/10.5465/amr.2007.25275678
Ambec, S., & Lanoie, P. (2008). Does it pay to be green? A systematic overview. Academy of Management Perspectives, 22(4), 45–62. https://doi.org/10.5465/amp.2008.35590353
Bansal, P., & Clelland, I. (2004). Talking trash: Legitimacy, impression management, and unsystematic risk in the context of the natural environment. Academy of Management Journal, 47(1), 93–103. https://doi.org/10.2307/20159562
Bansal, P., & Roth, K. (2000). Why companies go green: A model of ecological responsiveness. Academy of Management Journal, 43(4), 717–736. https://doi.org/10.5465/1556363
Chen, A., & Ong, T. S. (2022). Environmental performance, corporate governance and financial performance of Chinese heavy polluted industries. International Journal of Energy Economics and Policy, 12(3), 274–283. https://www.econjournals.com/index.php/ijeep/article/view/12862
Chen, X., Ding, S., & Xu, J. (2008). Ownership structure, market mechanisms, and corporate environmental performance. China Economic Review, 19(5), 676–688. https://doi.org/10.1016/j.chieco.2008.08.002
Chen, Y., Sun, S., & Wang, Z. (2018). Environmental regulation and firm performance: Evidence from China’s manufacturing industries. Journal of Cleaner Production, 196, 964–976. https://doi.org/10.1016/j.jclepro.2018.06.197
Clarkson, P. M., Li, Y., Richardson, G. D., & Vasvari, F. P. (2011). Does it really pay to be green? Determinants and consequences of proactive environmental strategies. Journal of Accounting and Public Policy, 30(2), 122–144. https://doi.org/10.1016/j.jaccpubpol.2010.09.013
Delmas, M. A., & Montes-Sancho, M. J. (2011). An institutional perspective on the diffusion of international management system standards: The case of ISO 14001. Business Ethics Quarterly, 21(1), 103–132. https://doi.org/10.5840/beq20112115
Delmas, M. A., & Montiel, I. (2009). The qualitative difference between compliance strategies and voluntary sustainability initiatives. Journal of Business Ethics, 90(2), 297–311. https://doi.org/10.1007/s10551-010-0448-3
Delmas, M. A., & Toffel, M. W. (2008). Organizational responses to environmental demands: Opening the black box. Strategic Management Journal, 29(10), 1027–1055. https://doi.org/10.1002/smj.701
Demsetz, H., & Villalonga, B. (2001). Ownership structure and corporate performance. Journal of Corporate Finance, 7(3), 209–233. https://doi.org/10.1016/S0929-1199(01)00020-7
Deng, X., Li, S., & Zhang, Y. (2013). Environmental regulations and firm profitability: Evidence from China. China Economic Review, 26, 75–85. https://doi.org/10.1016/j.chieco.2013.07.006
Ding, W., Levine, R., Lin, C., & Xie, W. (2021). Corporate immunity to the COVID-19 pandemic. Journal of Financial Economics, 141(2), 802–830. https://doi.org/10.1016/j.jfineco.2021.03.005
Du, C., Zhang, Q., & Huang, D. (2023). Environmental protection subsidies, green technology innovation and environmental performance: Evidence from China’s heavy-polluting listed firms. PLOS ONE, 18(6), e0286501. https://doi.org/10.1371/journal.pone.0286501
Eccles, R. G., Ioannou, I., & Serafeim, G. (2014). The impact of corporate sustainability on organizational processes and performance. Management Science, 60(11), 2835–2857. https://doi.org/10.1287/mnsc.2014.1984
Fama, E. F., & French, K. R. (1992). The cross-section of expected stock returns. Journal of Finance, 47(2), 427–465. https://doi.org/10.1111/j.1540-6261.1992.tb04398.x
Fama, E. F., & French, K. R. (1998). Taxes, financing decisions, and firm value. Journal of Finance, 53(3), 819–843. https://doi.org/10.1111/0022-1082.00036
Friede, G., Busch, T., & Bassen, A. (2015). ESG and financial performance: Aggregated evidence from more than 2000 empirical studies. Journal of Sustainable Finance & Investment, 5(4), 210–233. https://doi.org/10.1080/20430795.2015.1118917
Guo, X., Ma, J., Feng, Y., & Chen, B. (2023). Green credit policy and short-term financing for long-term investment: Evidence from China’s heavily polluting enterprises. Sustainability, 15(3), 2197. https://doi.org/10.3390/su15032197
Hart, S. L. (1995). A natural-resource-based view of the firm. Academy of Management Review, 20(4), 986–1014. https://doi.org/10.5465/amr.1995.9512280033
Hart, S. L., & Ahuja, G. (1996). Does it pay to be green? An empirical examination of the relationship between emission reduction and firm performance. Business Strategy and the Environment, 5(1), 30–37. https://doi.org/10.1002/(SICI)1099-0836(199603)5:1<30::AID-BSE38>3.0.CO;2-Q
He, L., & Shen, J. (2019). Do environmental regulations improve firm performance? Evidence from China. Journal of Environmental Management, 248, 109313. https://doi.org/10.1016/j.jenvman.2019.109313
He, P., Sun, Y., Shen, H., & Jian, J. (2020). Does environmental regulation improve firm productivity? Evidence from China’s new environmental protection law. Journal of Cleaner Production, 244, 118763. https://doi.org/10.1016/j.jclepro.2019.118763
Ioannou, I., & Serafeim, G. (2012). The impact of corporate social responsibility on investment recommendations. Financial Analysts Journal, 68(4), 25–44. https://doi.org/10.2469/faj.v68.n4.6
Ji, L., Jia, P., & Yan, J. (2021). Green credit, environmental protection investment and debt financing for heavily polluting enterprises. PLOS ONE, 16(11), e0259647. https://doi.org/10.1371/journal.pone.0259647
King, A. A., & Lenox, M. J. (2001). Does environmental compliance cost too much? Journal of Industrial Ecology, 5(1), 37–58. https://doi.org/10.1162/108819801753358497
King, A. A., & Lenox, M. J. (2002). Exploring the locus of profitable pollution reduction. Management Science, 48(2), 289–299. https://doi.org/10.1287/mnsc.48.2.289.7731
Klassen, R. D., & McLaughlin, C. P. (1996). The impact of environmental management on firm performance. Management Science, 42(8), 1199–1214. https://doi.org/10.1287/mnsc.42.8.1199
La Porta, R., Lopez-de-Silanes, F., Shleifer, A., & Vishny, R. (1997). Legal determinants of external finance. Journal of Finance, 52(3), 1131–1150. https://doi.org/10.1111/j.1540-6261.1997.tb02727.x
Li, D., Cao, C., Zhang, L., Chen, X., Ren, S., & Zhao, Y. (2017). Effects of corporate environmental responsibility on financial performance: The moderating role of government regulation and organisational slack. Journal of Cleaner Production, 166, 1323–1334. https://doi.org/10.1016/j.jclepro.2017.08.129
Li, Y., Liu, Z., & Zou, P. (2019). Green innovation and firm performance in China: The moderating role of industry characteristics. Technological Forecasting and Social Change, 146, 588–596. https://doi.org/10.1016/j.techfore.2019.06.023
Lindenberg, E. B., & Ross, S. A. (1981). Tobin’s Q ratio and industrial organization. Journal of Business, 54(1), 1–32. https://www.jstor.org/stable/2352631
Liu, X., Quan, X., & Wang, Y. (2021). Environmental regulation intensity and corporate green innovation: Evidence from China. Journal of Environmental Management, 296, 113288. https://doi.org/10.1016/j.jenvman.2021.113288
Liu, Y., Qin, H., Gan, Q., & Su, J. (2020). Internal control quality, enterprise environmental protection investment and financial performance. International Journal of Environmental Research and Public Health, 17(17), 6085. https://doi.org/10.3390/ijerph17176085
Liu, Z., Zhu, J., & Sun, Y. (2022). Research on the correlation between environmental performance and financial performance in China’s heavy pollution industries. Polish Journal of Environmental Studies, 31(2), 1295–1307. https://doi.org/10.15244/pjoes/140386
Luo, Y., & Tung, R. L. (2007). International expansion of emerging market enterprises. Journal of International Business Studies, 38(4), 481–498. https://doi.org/10.1057/palgrave.jibs.8400275
McConnell, J. J., & Servaes, H. (1995). Equity ownership and the two faces of debt. Journal of Financial Economics, 39(1), 131–157. https://doi.org/10.1016/0304-405X(95)00824-X
Orlitzky, M., Schmidt, F. L., & Rynes, S. L. (2003). Corporate social and financial performance. Organization Studies, 24(3), 403–441. https://doi.org/10.1177/0170840603024003910
Petersen, M. A. (2009). Estimating standard errors in finance panel data sets: Comparing approaches. Review of Financial Studies, 22(1), 435–480. https://doi.org/10.1093/rfs/hhn053
Porter, M. E., & van der Linde, C. (1995). Toward a new conception of the environment–competitiveness relationship. Journal of Economic Perspectives, 9(4), 97–118. https://doi.org/10.1257/jep.9.4.97
Ren, S., Yuan, B., Ma, X., & Chen, X. (2021). Internationalisation of Chinese firms: The role of environmental regulation and green innovation. Journal of Cleaner Production, 312, 127689. https://doi.org/10.1016/j.jclepro.2021.127689
Russo, M. V., & Fouts, P. A. (1997). A resource-based perspective on environmental performance and firm outcomes. Academy of Management Journal, 40(3), 534–559. https://doi.org/10.5465/257052
Schaltegger, S., & Burritt, R. (2018). Business cases and corporate engagement with sustainability. Journal of Business Ethics, 147(2), 241–259. https://doi.org/10.1007/s10551-017-9582-3
Servaes, H., & Tamayo, A. (2013). The impact of corporate social responsibility on firm value: The role of customer awareness. Management Science, 59(5), 1045–1061. https://doi.org/10.1287/mnsc.1120.1630
Tang, R. (2023). Does green investment improve company performance? BCP Business & Management, 21, 201–212. https://doi.org/10.54691/bcpbm.v21i.2135
Wagner, M. (2010). Effects of corporate environmental strategy on firm performance. Business Strategy and the Environment, 19(2), 100–114. https://doi.org/10.1002/bse.637
Wintoki, M. B., Linck, J. S., & Netter, J. M. (2012). Endogeneity and the dynamics of internal corporate governance. Journal of Financial Economics, 105(3), 581–606. https://doi.org/10.1016/j.jfineco.2012.03.005
Wooldridge, J. M. (2010). Econometric analysis of cross section and panel data (2nd ed.). MIT Press. https://mitpress.mit.edu/9780262232586
Xue, L., & Zhang, X. (2022). Can digital financial inclusion promote green innovation in heavily polluting companies? International Journal of Environmental Research and Public Health, 19(7), 4048. https://doi.org/10.3390/ijerph19074048
Zhang, C., Li, H., Gou, X., Feng, J., & Gao, X. (2022). CEO educational attainment, green innovation, and enterprise performance. Frontiers in Environmental Science, 10, 903212. https://doi.org/10.3389/fenvs.2022.903212
Zhang, D., Li, S., & Zhao, Q. (2021). Environmental regulation, innovation, and firm performance: Evidence from China. Technological Forecasting and Social Change, 168, 120745. https://doi.org/10.1016/j.techfore.2021.120745
Zhang, D., Rong, Z., & Ji, Q. (2019). Green innovation and firm performance: Evidence from listed companies in China. Resources, Conservation and Recycling, 144, 48–55. https://doi.org/10.1016/j.resconrec.2019.01.023
Zhao, X., Huo, B., Selen, W., & Yeung, J. H. Y. (2017). The impact of environmental regulation on firm performance: A meta-analysis. Journal of Cleaner Production, 142, 641–651. https://doi.org/10.1016/j.jclepro.2016.04.136
Zhu, Q., & Geng, Y. (2013). Drivers and barriers of extended supply chain practices for energy saving and emission reduction among Chinese manufacturers. Journal of Cleaner Production, 40, 6–12. https://doi.org/10.1016/j.jclepro.2012.07.010
Zhu, Q., Geng, Y., & Lai, K. H. (2012). Environmental conditions and green supply chain management in China. Journal of Cleaner Production, 18(10–11), 842–849. https://doi.org/10.1016/j.jclepro.2010.10.004
Zhu, Q., & Sarkis, J. (2004). Relationships between operational practices and performance among early adopters of green supply chain management. Journal of Operations Management, 22(3), 265–289. https://doi.org/10.1016/j.jom.2004.01.005
Downloads
Published
Issue
Section
License
Copyright (c) 2026 The Author(s)
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
