The effect of environmental performance and preference disclosure on financial performance: Empirical evidence from unbalanced panel data of heavy-pollution industries in China
Abstract: Environmental
performance and propensity disclosure is important for stakeholders to estimate
firms’ incentives in environmental management practices. The purpose of this
article is to explore the impacts of environmental performance and propensity
disclosure on financial performance using unbalanced panel data of eight
heavy-pollution industries in China.
Design/methodology/approach: Environmental performance and propensity
exhibits mutual causality relationship with Tobin’s Q value using unit root and
co-integration test of panel data. Using panel data analysis, we take the
impacts of environmental performance and propensity disclosure on financial
performance from 2008 to 2012.
Findings: Environmental performance has a significantly negative impact
on Tobin’s Q value at the significance levels of 1%, while environmental
propensity has a significantly positive effect on Tobin’s Q value at the
significance levels of 5%. Firm size, financial leverage and return of assets
have significantly positive impacts on financial performance at the
significance levels of 1%. Meanwhile the effect of corporate environmental
performance and propensity on financial performance has a significantly
periodic difference from 2008 to 2012.
Research limitations/implications: Those results are helpful for
environmental regulators to evaluate the implementing effect of voluntary
environmental policy and for firms’ managers to increase market expectation and
improve financial performance.
Originality/value: Environmental performance is estimated by 30
environmental indicators in eight heavy-pollution industries in China.
Environmental performance and propensity disclosure has a U-typed relationship
with financial performance.
Keywords: environmental
performance; environmental preference; unbalanced panel data; Tobin’s Q;
causality test; panel data
Author: Kai Chang
Journal Code: jptindustrigg150020
