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Formal Institutional Pressure and the Integration of Corporate Environmental and Financial Performance: Empirical Evidence from Listed Companies in Heavily Polluting Industries in China

Author

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  • Ying Shu

    (College of Economics and Management, Nanjing Forestry University, Nanjing 210037, China
    School of Management and Engineering, Nanjing University, Nanjing 210008, China)

  • Xiaobin Zhuang

    (School of Government, Nanjing University, Nanjing 210023, China)

  • Rui Ying

    (School of Economics and Management, Nanjing University of Science and Technology, Nanjing 210094, China)

  • Guanghua Xu

    (School of Economics and Management, Nanjing University of Science and Technology, Nanjing 210094, China)

Abstract

China’s “carbon peak and neutrality” policy has thrust the convergence of corporate ecological conservation and economic progress to the forefront of sustainable development. This study, aiming to tackle the “sustainability challenge”, delves into the driving forces and operative mechanisms that intertwine corporate environmental performance with financial outcomes from 2015 to 2020. Focusing on A-share listed companies in heavily polluting sectors across Shanghai and Shenzhen stock exchanges, it categorizes formal institutional pressure into two types: command-oriented and market-driven, revealing a significantly stronger positive effect of market-based pressure compared to command-based pressure. Additionally, this research examines the distinct impacts of these institutional pressures under different conditions such as ownership structure, regional location, and executive education levels. The findings indicate that state-owned enterprises, eastern region firms, and those led by highly educated executives are more responsive to command-based pressure. Conversely, privately-owned businesses, entities in central–western regions, and those with lower executive education primarily respond to market-based pressure. Moreover, this study underscores the interplay between informal and formal institutions, observing that the influence of market-based pressure on corporate environmental–financial integration is notably amplified when public awareness of environmental protection increases, thereby highlighting social factors’ pivotal role in business decision-making. In essence, this paper accentuates the significance of aligning corporate environmental and financial goals for sustainable development, offering fresh insights to academia and fostering sustainable practices and research within the corporate realm.

Suggested Citation

  • Ying Shu & Xiaobin Zhuang & Rui Ying & Guanghua Xu, 2024. "Formal Institutional Pressure and the Integration of Corporate Environmental and Financial Performance: Empirical Evidence from Listed Companies in Heavily Polluting Industries in China," Sustainability, MDPI, vol. 16(6), pages 1-20, March.
    • Handle: RePEc:gam:jsusta:v:16:y:2024:i:6:p:2471-:d:1358083
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    References listed on IDEAS

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    Cited by:

    1. Shu, Ying & Zhuang, Xiaobin & Xu, Guanghua & Zhang, Shanfei & Ying, Rui, 2024. "Peer effects, environmental regulation and environmental financial integration—Empirical evidence from listed companies in heavily polluting industries," Economic Analysis and Policy, Elsevier, vol. 82(C), pages 1446-1458.
    2. Zhang, Shanfei & Xu, Guanghua & Shu, Ying & Zhu, Jian, 2024. "Corporate ESG competitive disadvantage and cost of debt financing," Finance Research Letters, Elsevier, vol. 69(PA).

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