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Impacts of industrial heterogeneity and technical innovation on the relationship between environmental performance and financial performance

  • Ruiqian Li
    ,
  • Ram Ramanathan
Research Output: Contribution to journal Article Peer-review

Open access

Sustainable Development Goals

  • SDG 9 - Industry, Innovation, and Infrastructure
    SDG 9 Industry, Innovation, and Infrastructure

Abstract

In this paper, we investigate the relationship between environmental performance (EP) and financial performance (FP) from the perspective of technical innovation in Chinese industrial sectors. We also consider industrial heterogeneity and take temporal variations of the link into account. We collect the required data from different Chinese statistical yearbooks from 2004 to 2015. We use an aggregated index of environmental pollutants as a proxy for EP and return on assets as a proxy for FP, and we employ research and development expenditure to capture technical innovation. The empirical results indicate that industrial heterogeneity exists and the EP–FP link varies in different industrial groups. There is no evidence that the EP–FP link becomes more positive and more significant over time. Furthermore, the mediation effect of technical innovation and environmental pressures can jointly affect the link. Finally, technical innovation partially mediates the EP–FP link but only in Chinese light-polluting sectors not in heavy-polluting sectors. The mediating role of technical innovation has a great impact on shaping the EP–FP link. When technical innovation partially mediates the focal link, apart from the indirect link, the direct EP–FP link is likely to be positive. If not, the direct EP–FP link is likely to be negative.

Publication Information

Output type

Research Output: Contribution to journal Article Peer-review

Original language

English

Pages from-to (Number of pages)

Pages 1653-1688

Journal (Volume, Issue Number)

Sustainability (Switzerland) (Volume 10, Issue 5)

Publication milestones

  • Published - 21/05/2018

Publication status

Published - 21/05/2018

ISSN

2071-1050

External Publication IDs

  • handle.net: 10547/622718
  • Scopus: 85047255622

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