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Environmental Performance and Financing Decisions Impact on Sustainable Financial Development of Chinese Environmental Protection Enterprises

Kai Quan Zhang () and Hsing Hung Chen ()
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Kai Quan Zhang: School of Economics and Business Administration, Longyan University, Longyan 364012, China
Hsing Hung Chen: School of Business, Macau University of Science and Technology, Taipa, Macau, China

Sustainability, 2017, vol. 9, issue 12, 1-14

Abstract: Environmental protection firms need to improve their ability to access financing while maintaining good economic performance under mounting environmental pressures. After the integration of trade-off and stakeholder theories, we have constructed a number of mathematical models to investigate the relationship among financing decisions, environmental performance (EP), and economic performance. Unbalanced panel data from environmental protection companies listed on Chinese stock exchanges from 2007 to 2016 were collected and analyzed. Our results have confirmed that debt financing has a significant impact on short- and long-term economic performance. Firms prefer long-term debt over short-term debt to improve their financial sustainability. Internal financing is positively related to performance because the cost of financing is lower. Environmental performance can cause extra financial burden in the short run, but will improve stakeholder relations and profitability in the long run. Our study suggests that environmental performance affects the relationship between financing decisions and economic performance. When EP initiatives are high, debt financing has a greater negative influence on short-term performance, and the effect on long-term performance is mitigated. High EP also reduces the impact of internal financing on performance.

Keywords: debt financing; internal financing; environmental performance (EP); short/long-term economic performance (search for similar items in EconPapers)
JEL-codes: Q Q0 Q2 Q3 Q5 Q56 O13 (search for similar items in EconPapers)
Date: 2017
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