Impact of market incentive-based environmental regulations on corporate financial performance in a circular economy

In the Chinese capital market, environmental regulations based on market incentives will have a significant impact on the economic activities of enterprises. To understand the impact of market incentive based environmental regulations on corporate financial performance, this study proposes a financial performance calculation model based on an improved long short-term memory network to evaluate corporate financial performance. On the basis of making assumptions, impact analysis is conducted through regression analysis and other methods. The experimental results indicate that the difference between output and expected financial performance is only 0.023. Technological innovation (TI) was significantly negatively correlated with market-based environmental regulation (p < 0.05), and significantly positively correlated with corporate financial performance (p < 0.01). The research method can effectively analyse the impact of environmental regulations on corporate financial performance based on market incentives. Most existing research analyses national or regional data, with less emphasis on the perspective of individual enterprises.