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Linking Environmental Regulation and Financial Performance: The Mediating Role of Green Dynamic Capability and Sustainable Innovation

Author

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  • Xinpeng Xing

    (School of Business, Jiangnan University, Wuxi 214122, China)

  • Tiansen Liu

    (School of Economics and Management, Harbin Engineering University, Harbin 150001, China
    School of Social and Behavioral Sciences, Nanjing University, Nanjing 210023, China)

  • Lin Shen

    (School of Business, Jiangnan University, Wuxi 214122, China)

  • Jianhua Wang

    (School of Business, Jiangnan University, Wuxi 214122, China)

Abstract

This study develops a multiple mediating model for exploring the link between environmental regulation and financial performance through green dynamic capability, sustainability exploration/exploitation innovation, based on the data from 355 Chinese manufacturing firms. Empirical results support a mediating role of green dynamic capability and sustainability exploration/exploitation in the link between environmental regulation and financial performance, respectively. What’s more, our findings indicate that environmental regulation can help improve financial performance via two multiple mediating paths, i.e., green dynamic capability and sustainability exploration innovation, as well as green dynamic capability and sustainability exploitation innovation. These key findings will help to understand how important green dynamic capability and sustainable innovation is when Chinese manufacturing firms establish a business-politics tie.

Suggested Citation

  • Xinpeng Xing & Tiansen Liu & Lin Shen & Jianhua Wang, 2020. "Linking Environmental Regulation and Financial Performance: The Mediating Role of Green Dynamic Capability and Sustainable Innovation," Sustainability, MDPI, vol. 12(3), pages 1-22, January.
    • Handle: RePEc:gam:jsusta:v:12:y:2020:i:3:p:1007-:d:314669
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    5. Danni Yu & Shen Tao & Abdul Hanan & Tze San Ong & Badar Latif & Mohsin Ali, 2022. "Fostering Green Innovation Adoption through Green Dynamic Capability: The Moderating Role of Environmental Dynamism and Big Data Analytic Capability," IJERPH, MDPI, vol. 19(16), pages 1-20, August.
    6. Jamel Chouaibi, 2021. "Innovation and Financial Performance in Manufacturing Companies: an Empirical Study Tunisian," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 12(4), pages 1870-1890, December.
    7. Xin Xie & Shabnam Khan & Saqib Rehman & Shumaila Naz & Syed Arslan Haider & Umar Nawaz Kayani, 2024. "Ameliorating sustainable business performance through green constructs: a case of manufacturing industry," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 26(9), pages 22655-22687, September.
    8. Adam P. Hejnowicz & Jessica P. R. Thorn, 2022. "Environmental Policy Design and Implementation: Toward a Sustainable Society," Sustainability, MDPI, vol. 14(6), pages 1-10, March.
    9. Zahid Yousaf & Magdalena Radulescu & Crenguta Sinisi & Abdelmohsen A. Nassani & Mohamed Haffar, 2022. "How Do Firms Achieve Green Innovation? Investigating the Influential Factors among the Energy Sector," Energies, MDPI, vol. 15(7), pages 1-14, March.
    10. Philips, Abiodun S., 2023. "Institutional enforcement of environmental fiscal stance and energy stock markets performance: Evaluating for returns and risk among connected markets," Energy, Elsevier, vol. 263(PE).
    11. Abdelmohsen A. Nassani & Asad Javed & Magdalena Radulescu & Zahid Yousaf & Carmen Gabriela Secara & Claudia Tolea, 2022. "Achieving Green Innovation in Energy Industry through Social Networks, Green Dynamic Capabilities, and Green Organizational Culture," Energies, MDPI, vol. 15(16), pages 1-12, August.
    12. Eunmi Lee, 2020. "Environmental Regulation and Financial Performance in China: An Integrated View of the Porter Hypothesis and Institutional Theory," Sustainability, MDPI, vol. 12(23), pages 1-22, December.
    13. Han Xiao & Abdullah Al Mamun & Mohammad Masukujjaman & Qing Yang, 2023. "Modelling the significance of strategic orientation on green innovation: mediation of green dynamic capabilities," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-15, December.
    14. Qiwen Dai & Huihua Huang & Xiaoqi Zhang & Yumin Su & Cheyuan Liu & Qiangyi Li, 2022. "Mediation Effect of Corporate Tax Burden and the Relationship between Environmental Regulation and Firm Performance," IJERPH, MDPI, vol. 19(22), pages 1-23, November.
    15. Min Zhang & Yu Su & Peng Zhu, 2022. "Will Green Innovation Bring about the Financial Spillover Effect? Evidence from China’s High-Carbon Listed Companies," Sustainability, MDPI, vol. 15(1), pages 1-20, December.

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