How does environmental regulation promote firm performance? Evidence from Chinese environmentally friendly firms

Bibliographic Data

ID21600392
AuthorsChang Yü (0000-0002-9795-3443, Renmin University of China), Xiaohui Zhao (0000-0001-6641-7990, Beijing Institute of Technology, corresponding author), Lei Ma (0000-0003-4268-0596, Beijing Institute of Technology), Luyao Ma (0000-0002-4484-6804, Beijing Institute of Technology), Xiangang Zeng (0000-0001-8013-4735, Renmin University of China)
Year2026
Volume69
Issue6
Pages1708-1737
Publication date2026-05-12
Open AccessNo
TypeARTICLE
VenueJournal of Environmental Planning and Management (JOURNAL)
Journal identifiersISSN: 0964-0568 • E-ISSN: 1360-0559
PublisherInforma UK Limited (PUBLISHER • GB)
DOI10.1080/09640568.2025.2452401
OpenAlexW4407259470
LanguageEN
References cited116

This study focuses on the impact of environmental regulations on the financial performance of environmentally friendly firms and the mechanisms involved. Environmentally friendly firms are increasingly profitable, as they reduce emissions and promote sustainable practices. Stricter regulations can enhance their competitiveness and drive demand in the environmental protection sector. However, the literature has overlooked the unique advantages that green-oriented firms possess in response to environmental regulations. Few studies have explored how environmental regulations affect the performance of environmentally friendly firms, and the mechanisms involved are not well understood. This study reveals four key findings. First, environmental regulations have a positive influence on corporate financial performance. Second, innovation is the key mechanism that significantly enhances this effect. Third, heterogeneity research indicates that the performance of state-owned enterprises is superior to that of private enterprises, indicating that the innovativeness of non-SOEs has failed to surpass the resource advantages of SOEs. Fourth, this positive effect of environmental regulation on financial performance is more significant for environmentally friendly enterprises in economically developed regions or small and medium-sized environmentally friendly enterprises

Business · Economics · Environmental economics · Environmental regulation · Environmentally Friendly · Industrial organization · Natural resource economics · Corporate Social Responsibility Reporting · Energy, Environment, Economic Growth · Environmental Sustainability in Business · Ecology

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