Does green transformation improve firm performance? Evidence of China

Asif Ali, Zunhuan Shen, Ding Haotian and Farman Ali

Journal of Sustainable Finance & Investment, 2026, vol. 16, issue 1, 22-54

Abstract: This article explores the relationship between green transformation and the firm performance of Chinese enterprises listed on the Shanghai and Shenzhen stock markets over the period of 2006–2022. Our study findings indicate that green transformation positively and significantly influences the firms’ financial performance. These outcomes suggest that investment in green transformation or adoption and implementation of green practices assists firms in establishing a green image, which in turn attracts the attention of different stakeholders, including green investors and green consumers, ultimately enhancing the firm's performance. Our baseline outcomes remain unchanged after accounting for a series of robustness checks, including alternative indicators of green transformation, endogeneity tests, sample change checks, and heterogeneity analysis. In a nutshell, our outcomes suggest that, along with the implementation of environmental protection law, the government should provide subsidies to the firms in order to promote green transformation.

Date: 2026
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DOI: 10.1080/20430795.2026.2620380

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