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How does the toxic and sustainable index influence on corporate performance? A comparison analysis before and after pandemic

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  • Kang, Haijun
  • Chi, Shangping
  • Wang, Xiuzhong
  • Li, Zhuoran

Abstract

This study, based on U.S. firm-level data from 2010 to 2023, employs a Difference-in-Differences (DID) model to examine the financial performance of toxic and sustainable firms before and after the COVID-19 pandemic. Firms are categorized as toxic—including air, water, and greenhouse gas polluters—or sustainable, based on their environmental practices. The DID approach enables us to identify the causal impact of the pandemic on firm performance by comparing the differential changes in key financial metrics—specifically, Return on Assets (ROA) and Return on Equity (ROE)—between toxic and sustainable firms across the pre- and post-pandemic periods. Our findings reveal that firms with high greenhouse gas emissions experienced significant financial deterioration after the pandemic, attributed to increased regulatory costs, compliance burdens, and reputational damage. In contrast, sustainable firms demonstrated strong post-pandemic resilience, with notable improvements in ROA. These results suggest that environmentally responsible firms gained a strategic advantage through enhanced market perceptions and better alignment with evolving regulatory and stakeholder expectations.

Suggested Citation

  • Kang, Haijun & Chi, Shangping & Wang, Xiuzhong & Li, Zhuoran, 2025. "How does the toxic and sustainable index influence on corporate performance? A comparison analysis before and after pandemic," International Review of Economics & Finance, Elsevier, vol. 100(C).
    • Handle: RePEc:eee:reveco:v:100:y:2025:i:c:s1059056025002837
    DOI: 10.1016/j.iref.2025.104120
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    3. Zhou, Fuyuan & Chen, Hanlong & Tang, Shiyu & Lee, Chuan & Lin, Chin-Tsai, 2025. "Integrating ESG into financial distress models: The role of financial report quality and innovation in the Chinese market," International Review of Economics & Finance, Elsevier, vol. 101(C).
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