Environmental performance, sustainability, governance and financial performance: Evidence from heavily polluting industries in China

This study seeks to contribute to the existing business strategy and the environment literature by examining the effect of governance structures on Chinese firms' environmental performance, and consequently ascertain the extent to which the financial performance-environmental performance nexus is moderated by governance mechanisms. Using a sample of Chinese companies from heavily polluting industries over a 5-year period, our baseline findings suggest that, on average, board size and governing board meetings are positively associated with Chinese firms' environmental performance, whilst board independence and gender diversity have positive, but insignificant association with firms' environmental performance. Our evidence suggests further that the examined internal governance mechanisms have a mixed moderating effect on the link between financial performance and environmental performance. Our findings have important implications for company executives, environmental activists, policy-makers, and regulators. Our results support insights drawn from agency, resource dependence, stakeholder, and legitimacy theories.

Automated summary

This study examines the impact of governance structures on Chinese firms' environmental performance and how they moderate the link between financial performance and environmental performance. The findings suggest that board size and governing board meetings are positively associated with environmental performance, while board independence and gender diversity have positive, but insignificant association. The internal governance mechanisms have a mixed moderating effect on the financial performance-environmental performance nexus.