Environmental policies and financial performance: stock market reaction to firms for their proactive environmental practices recognized by governmental programs

Yuan Chen, Vinod Singhal and Qinghua Zhu

Business Strategy and the Environment, 2021, vol. 30, issue 4, 1548-1562

Abstract: Firms implement proactive environmental practices (PEPs), and governments in developing countries such as China implement environmental policies such as pilot and demonstration programs to promote these PEPs. However, it remains unclear whether and when firms recognized by such governmental programs improve financial performance. Using a sample of 233 firms recognized by a national Chinese government environmental program, event study is employed to estimate stock market reaction of recognized firms. The Heckman two‐stage procedure is followed to examine the moderating effects. We find that the average stock market reaction is not significant. Cross‐sectional analyses indicate that firms with earlier recognitions, recognized for demonstration projects (compared with pilot ones), and operating in more‐polluting industries have greater market reactions, while types of PEPs (internal versus external), export intensity and government ownership (state‐owned or not) do not moderate the market reaction. This paper provides implications for firms about whether and when they should participate in a government environmental program.

Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://doi.org/10.1002/bse.2693

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:bstrat:v:30:y:2021:i:4:p:1548-1562

Ordering information: This journal article can be ordered from
http://onlinelibrary ... 1002/(ISSN)1099-0836

Access Statistics for this article

Business Strategy and the Environment is currently edited by Richard Welford

More articles in Business Strategy and the Environment from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().