IDEAS home Printed from https://ideas.repec.org/a/bla/bstrat/v35y2026i5p7218-7247.html

To Go Through All the Vicissitudes: Can Bribery Improve Emerging Economy Firm's Financial Performance Under Environmental Regulation? Evidence From China

Author

Listed:
  • He Cheng
  • Jianquan Guo
  • Natalia Ribberink

Abstract

Analyzing a sample of Chinese firms spanning from 2007 to 2022, we yield the following findings: (1) Local environmental regulations have a negative impact on short‐term firm financial performance, and this impact can be weakened by corporate bribery. However, local environmental regulations enhance firm long‐term financial performance after initiatives by the central government to rectify issues within the “top‐down” management system; (2) Further analysis indicates that the effects of bribery on firm financial performance depend on the focus of the central government. Additionally, bribery undermines firm's research and development investment, though this investment is beneficial for long‐term development. Our research not only provides suggestions for firms in emerging economies on how to respond to environmental regulations but also provides insights for governments about how to achieve a “win‐win” situation through proper environmental regulations.

Suggested Citation

  • He Cheng & Jianquan Guo & Natalia Ribberink, 2026. "To Go Through All the Vicissitudes: Can Bribery Improve Emerging Economy Firm's Financial Performance Under Environmental Regulation? Evidence From China," Business Strategy and the Environment, Wiley Blackwell, vol. 35(5), pages 7218-7247, July.
    • Handle: RePEc:bla:bstrat:v:35:y:2026:i:5:p:7218-7247
    DOI: 10.1002/bse.70505
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/bse.70505
    Download Restriction: no
    File URL: https://libkey.io/10.1002/bse.70505?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Da Gao & Yi Li & Linfang Tan, 2024. "Can environmental regulation break the political resource curse: evidence from heavy polluting private listed companies in China," Journal of Environmental Planning and Management, Taylor & Francis Journals, vol. 67(13), pages 3190-3216, November.
    2. Paul Lanoie & Michel Patry & Richard Lajeunesse, 2008. "Environmental regulation and productivity: testing the porter hypothesis," Journal of Productivity Analysis, Springer, vol. 30(2), pages 121-128, October.
    3. Jakob Svensson, 2003. "Who Must Pay Bribes and How Much? Evidence from a Cross Section of Firms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(1), pages 207-230.
    4. Ferris, Stephen P. & Hanousek, Jan & Tresl, Jiri, 2021. "Corporate profitability and the global persistence of corruption," Journal of Corporate Finance, Elsevier, vol. 66(C).
    5. Emily Oster, 2019. "Unobservable Selection and Coefficient Stability: Theory and Evidence," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 37(2), pages 187-204, April.
    6. Yan, Zheming & Yu, Ying & Du, Kerui & Zhang, Ning, 2024. "How does environmental regulation promote green technology innovation? Evidence from China's total emission control policy," Ecological Economics, Elsevier, vol. 219(C).
    7. Yong Fang & Zhenquan Shao, 2022. "Whether Green Finance Can Effectively Moderate the Green Technology Innovation Effect of Heterogeneous Environmental Regulation," IJERPH, MDPI, vol. 19(6), pages 1-19, March.
    8. Thang Ngoc Bach & Khanh Hoang & Thanh Le, 2025. "Biodiversity risk and firm performance: Evidence from US firms," Business Strategy and the Environment, Wiley Blackwell, vol. 34(1), pages 1113-1132, January.
    9. Bennouri, Moez & Chtioui, Tawhid & Nagati, Haithem & Nekhili, Mehdi, 2018. "Female board directorship and firm performance: What really matters?," Journal of Banking & Finance, Elsevier, vol. 88(C), pages 267-291.
    10. Ufere, Nnaoke & Gaskin, James & Perelli, Sheri & Somers, Antoinette & Boland, Richard, 2020. "Why is bribery pervasive among firms in sub-Saharan African countries? Multi-industry empirical evidence of organizational isomorphism," Journal of Business Research, Elsevier, vol. 108(C), pages 92-104.
    11. Edmund Mallinguh & Christopher Wasike & Zeman Zoltan, 2020. "The Business Sector, Firm Age, and Performance: The Mediating Role of Foreign Ownership and Financial Leverage," IJFS, MDPI, vol. 8(4), pages 1-16, December.
    12. Pan, Dan & Chen, Huan, 2021. "Border pollution reduction in China: The role of livestock environmental regulations," China Economic Review, Elsevier, vol. 69(C).
    13. Jianquan Guo & He Cheng, 2025. "How does campaign-style environmental regulation benefit Chinese listed firms? Considering merger and acquisition and bribery," Journal of Regulatory Economics, Springer, vol. 68(3), pages 264-302, December.
    14. Xuemei Xie & Guoyou Qi & Kevin Xiaoguo Zhu, 2019. "Corruption and New Product Innovation: Examining Firms’ Ethical Dilemmas in Transition Economies," Journal of Business Ethics, Springer, vol. 160(1), pages 107-125, November.
    15. Cheng, Louis T.W. & Chan, Ricky Y.K. & Leung, T.Y., 2018. "Impact of perk expenditures and marketing expenditures on corporate performance in China: The moderating role of political connections," Journal of Business Research, Elsevier, vol. 86(C), pages 83-95.
    16. Jain, Ritika, 2020. "Bribery and firm performance in India: A political economy perspective," Journal of Asian Economics, Elsevier, vol. 68(C).
    17. Xie, En & Fang, Alex Junyi & Chen, Xin & Wu, Zhan & Kumar, Vikas, 2022. "Performance feedback on sales growth goal and OFDI location choices for firms in emerging economies," Journal of World Business, Elsevier, vol. 57(4).
    18. Jianquan Guo & He Cheng, 2024. "Acquirers’ carbon risk, environmental regulation, and cross-border mergers and acquisitions: evidence from China," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 26(6), pages 15861-15904, June.
    19. Lin, Jing & Cao, Xiyang & Dong, Xiaoqi & An, Yunbi, 2024. "Environmental regulations, supply chain relationships, and green technological innovation," Journal of Corporate Finance, Elsevier, vol. 88(C).
    20. Boubaker, Sabri & Liu, Pei-Zhi & Ren, Yi-Shuai & Ma, Chao-Qun, 2024. "Do anti-corruption campaigns affect corporate environmental responsibility? Evidence from China," International Review of Financial Analysis, Elsevier, vol. 91(C).
    21. Nirosha Hewa Wellalage & Stuart Locke & Helen Samujh, 2020. "Firm bribery and credit access: evidence from Indian SMEs," Small Business Economics, Springer, vol. 55(1), pages 283-304, June.
    22. Jan Hanousek & Anastasiya Shamshur & Jan Svejnar & Jiri Tresl, 2021. "Corruption level and uncertainty, FDI and domestic investment," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 52(9), pages 1750-1774, December.
    23. Huong Vu & Tuyen Quang Tran & Tuan Nguyen & Steven Lim, 2018. "Corruption, Types of Corruption and Firm Financial Performance: New Evidence from a Transitional Economy," Journal of Business Ethics, Springer, vol. 148(4), pages 847-858, April.
    24. Zheng, Zhigang & Li, Jiarong & Ren, Xingzi & Guo, Jie Michael, 2023. "Does corporate ESG create value? New evidence from M&As in China," Pacific-Basin Finance Journal, Elsevier, vol. 77(C).
    25. Ruxin Wu & Piao Hu, 2019. "Does the “Miracle Drug” of Environmental Governance Really Improve Air Quality? Evidence from China’s System of Central Environmental Protection Inspections," IJERPH, MDPI, vol. 16(5), pages 1-20, March.
    26. Ved Dilip Beloskar & S. V. D. Nageswara Rao, 2023. "Did ESG Save the Day? Evidence From India During the COVID-19 Crisis," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 30(1), pages 73-107, March.
    27. Wang, Hui & Si, Ieongcheng & Chen, Zhihua, 2024. "Does the Belt and Road Initiative promote China and the countries along the route to reconstruct the global value chain? Evidence from value-added trade," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 63-83.
    28. Chaoyi Chen & Mehmet Pinar & Thanasis Stengos, 2024. "Bribery, regulation and firm performance: evidence from a threshold model," Empirical Economics, Springer, vol. 66(1), pages 405-430, January.
    29. Zhou, Kevin Zheng & Wang, Kui & Xu, Dean & Xie, En, 2022. "Drinking poison to quench thirst: Does bribery foster firm performance in China?," Journal of Business Research, Elsevier, vol. 147(C), pages 505-517.
    30. Nirosha Wellalage & Sujani Thrikawala, 2021. "Does bribery sand or grease the wheels of firm level innovation: evidence from Latin American countries," Journal of Evolutionary Economics, Springer, vol. 31(3), pages 891-929, July.
    31. Lee, Chien-Chiang & Wang, Chih-Wei & Ho, Shan-Ju, 2020. "Financial inclusion, financial innovation, and firms’ sales growth," International Review of Economics & Finance, Elsevier, vol. 66(C), pages 189-205.
    32. Gong, Robin Kaiji & Li, Yao Amber & Manova, Kalina & Sun, Stephen Teng, 2025. "Tickets to the global market: First US patent award and Chinese firm exports," Journal of International Economics, Elsevier, vol. 157(C).
    33. Bose, Sudipta & Minnick, Kristina & Shams, Syed, 2021. "Does carbon risk matter for corporate acquisition decisions?," Journal of Corporate Finance, Elsevier, vol. 70(C).
    34. Avraham Ebenstein, 2012. "The Consequences of Industrialization: Evidence from Water Pollution and Digestive Cancers in China," The Review of Economics and Statistics, MIT Press, vol. 94(1), pages 186-201, February.
    35. repec:hal:journl:hal-02312104 is not listed on IDEAS
    36. Ronald U. Mendoza & Ricardo A. Lim & Anne Ong Lopez, 2015. "Grease or Sand in the Wheels of Commerce? Firm Level Evidence on Corruption and SMES," Journal of International Development, John Wiley & Sons, Ltd., vol. 27(4), pages 415-439, 05-27.
    37. Xiaoli Hao & Wenqian Fu & Khaldoon Albitar, 2023. "Innovation with ecological sustainability: Does corporate environmental responsibility matter in green innovation?," Journal of Economic Analysis, Anser Press, vol. 2(3), pages 21-42, May.
    38. Kubo, Katsuyuki & Phan, Huu Viet, 2019. "State ownership, sovereign wealth fund and their effects on firm performance: Empirical evidence from Vietnam," Pacific-Basin Finance Journal, Elsevier, vol. 58(C).
    39. Farooq, Umar & Wen, Jun & Tabash, Mosab I. & Fadoul, Modawi, 2024. "Environmental regulations and capital investment: Does green innovation allow to grow?," International Review of Economics & Finance, Elsevier, vol. 89(PA), pages 878-893.
    40. Fu, Tong & Jian, Ze, 2021. "Corruption pays off: How environmental regulations promote corporate innovation in a developing country," Ecological Economics, Elsevier, vol. 183(C).
    41. Valentina De Marchi & Elisa Giuliani & Roberta Rabellotti, 2018. "Do Global Value Chains Offer Developing Countries Learning and Innovation Opportunities?," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 30(3), pages 389-407, July.
    42. Seung‐Hyun Lee & David H. Weng, 2013. "Does bribery in the home country promote or dampen firm exports?," Strategic Management Journal, Wiley Blackwell, vol. 34(12), pages 1472-1487, December.
    43. Zhuang, Zongwu & Han, Feng, 2024. "Urban spatial structure and firm growth: Evidence from China," Land Use Policy, Elsevier, vol. 145(C).
    44. Huang, Zijie & Cao, June & Pan, Lei, 2024. "Greening your way to profits: Green strategies and green revenues," Finance Research Letters, Elsevier, vol. 61(C).
    45. Pham, Huy & Ha, Van & Le, Hanh-Hong & Ramiah, Vikash & Frino, Alex, 2024. "The effects of polluting behaviour, dirty energy and electricity consumption on firm performance: Evidence from the recent crises," Energy Economics, Elsevier, vol. 129(C).
    46. Jiasi Fan & Zhexiong Tao & Jana Oehmichen & Hans Ees, 2024. "CEO career horizon and corporate bribery: a strategic relationship perspective," Asia Pacific Journal of Management, Springer, vol. 41(2), pages 701-717, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jianquan Guo & He Cheng, 2025. "How does campaign-style environmental regulation benefit Chinese listed firms? Considering merger and acquisition and bribery," Journal of Regulatory Economics, Springer, vol. 68(3), pages 264-302, December.
    2. Zhou, Kevin Zheng & Wang, Kui & Xu, Dean & Xie, En, 2022. "Drinking poison to quench thirst: Does bribery foster firm performance in China?," Journal of Business Research, Elsevier, vol. 147(C), pages 505-517.
    3. Tomasi, Chiara & Le, Quoc Thai & Nguyen, Thi Ngoc Lan, 2025. "Greasing or Grinding? Regulatory context and the productivity effects of corruption: Evidence from Vietnamese SMEs," European Journal of Political Economy, Elsevier, vol. 89(C).
    4. Yeo, Yun Dong, 2026. "Political regime change and firm bribery," Journal of Business Research, Elsevier, vol. 206(C).
    5. Hailiang Zou & Yunfeng Lu & Guoyou Qi, 2023. "Does Pay Disparity within Top Management Teams Lead to Bribery Activity? The Moderation of Demographic Diversity," Sustainability, MDPI, vol. 15(4), pages 1-23, February.
    6. Hyun Ju Jung & Seung-Hyun Lee, 2023. "The Impact of Bribery Relationships on Firm Growth in Transition Economies," Organization Science, INFORMS, vol. 34(1), pages 303-328, January.
    7. King, Timothy & Loncan, Tiago & Khan, Zaheer, 2025. "Dodging expropriation? The role of cash holdings as a firm-level driver of risky FDI location choices," International Business Review, Elsevier, vol. 34(6).
    8. Afzali, Mansoor & Ҫolak, Gönül & Fu, Mengchuan, 2021. "Economic uncertainty and corruption: Evidence from public and private firms," Journal of Financial Stability, Elsevier, vol. 57(C).
    9. Kadzima, Marvelous & Matemane, Reon & Machokoto, Michael & Lemma, Tesfaye T., 2025. "Beyond the balance sheet: SME financing strategies for fixed assets amid constraints," Finance Research Letters, Elsevier, vol. 85(PA).
    10. Nam Hoang Vu & Tram-Anh Nguyen & Tram Bao Hoang & Nguyen Viet Cuong, 2024. "Formal Firms with Bribery in a Dynamic Business Environment," Journal of Business Ethics, Springer, vol. 191(3), pages 571-589, May.
    11. Su, Yingrong & Tian, Jiexin & Ouyang, Hongbing, 2026. "Financial market openness, environmental regulation, and green technological innovation efficiency," International Review of Economics & Finance, Elsevier, vol. 105(C).
    12. Mohammad Amin & Yew Chong Soh, 2022. "Financial constraints and the impact of corruption on employment growth," Journal of International Development, John Wiley & Sons, Ltd., vol. 34(3), pages 612-635, April.
    13. Mohammad, Shoeb & Yang, Jie & Butt, Irfan, 2024. "Does corruption have a sanding or greasing impact on innovation? Reconciling the contrasting perspectives through a systematic literature review," Research Policy, Elsevier, vol. 53(7).
    14. Cheng, Peng & Wei, Jiuchang & Liu, Yang, 2024. "Give a plum in return for a peach: The effect of entrepreneurial informal financing on environmental corporate social responsibility," Journal of Business Research, Elsevier, vol. 175(C).
    15. Morales-Solis, Juan Carlos & Barker III, Vincent L. & Cordero, Arkangel M., 2023. "CEO's industry experience and emerging market SME performance: The effects of corruption and political uncertainty," Journal of Business Venturing Insights, Elsevier, vol. 20(C).
    16. Cao, June & Huang, Zijie & Kristanto, Ari Budi, 2025. "From bytes to blooms: Tech-driven transformation and green revenues," Energy Economics, Elsevier, vol. 144(C).
    17. Chhetri, Prabin Chauhan & S.N., Rajesh Raj, 2024. "Is bribery a conscious, strategic and rational choice? Impact on firms’ growth in India," Journal of Policy Modeling, Elsevier, vol. 46(5), pages 1000-1019.
    18. Gaygysyz Ashyrov & Jaan Masso, 2020. "Does corruption affect local and foreign-owned companies differently? Evidence from the BEEPS survey," Post-Communist Economies, Taylor & Francis Journals, vol. 32(3), pages 306-329, April.
    19. Phan, Trang Hoai & Stachuletz, Rainer, 2022. "Bribery - Export Nexus under the Firm’s Growth Obstacles," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 132144, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    20. Jianquan Guo & He Cheng, 2024. "Acquirers’ carbon risk, environmental regulation, and cross-border mergers and acquisitions: evidence from China," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 26(6), pages 15861-15904, June.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:bstrat:v:35:y:2026:i:5:p:7218-7247. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://onlinelibrary.wiley.com/journal/10.1002/(ISSN)1099-0836 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.