Driving Mechanism And Economic Consequences Of Firm Environmental Improvement

Environmental problems have got more and more serious in recent years,threatening the sustainability of economic development and life of citizens.Since enterprises cause the majority of pollution problems,their environmental behaviors deserve our attention.By using 425 listed companies in the environmental sensitive industries between 2008 and 2014 in China,I study the driving mechanism and economic consequences of firm environmental improvement,which is represented by energy conservation and emission reduction(ECER).I find that firm ECER behavior is driven by various internal and external factors.Governmental regulations,pressure from stakeholders and moral cognition of directors are positively related to firm ECER behavior.However,there is an inverse U shape relationship between firm ECER and product market competition.This means that firms tend to increase ECER effort in a highly competitive market,whereas they are relatively reluctant to take environment responsibility when the market competition is too high or too low.As for the economic consequences,I find ECER is positively related to environmental grant firms received from the government.However,ECER may not help firms increase their valuations.I also discover that firms which have higher ECER may be more likely to obtain ISO14001 environmental management system certifications.There is a positive relationship between enterprises’ export percentage and ISO certification,this positive relationship exists even if endogenous issue is considered.However,the direct relationship between exports and ECER is not significant.This implies that the signal effect of ISO certification can symbolize firms’ environmental efforts and help them gain competition advantage in oversea markets.Such research results may help us understand firms’ environmental improvement behavior and encourage them to take environmental responsibilities.