We investigate how state involvement in the ownership of non-listed entrepreneurial firms affects pollution fees levied by national and provincial governments in China. While the national government sets minimum environmental standards, provincial governments can enact requirements that exceed these minimums, and they are largely responsible for enforcing even the national standards, so environmental levies can measure concessions that provinces make to encourage development and employment. Furthermore, state ownership is a good proxy for a firm’s political connections, which can influence the (...) relationship between the firm and the environmental authorities. We find that firms with state ownership pay lower environmental levies, which indicates that concessions are made for political or economic purposes. However, these concessions are conditional on the level of development of the province offering them, with better developed provinces providing fewer concessions. (shrink)

Informal institutions are found to shape the behaviors of economic organizations within the business world by creating localized social norms and moral commitments. However, the existing literature pays greater attention to the financial consequences of such institutions, and little is known about their environmental impacts, especially in the context of transition economies. By linking institutional theory with environmental strategy literature, in this study, we develop a theoretical framework and empirically test how social trust, one of the dimensions of informal institutions, (...) influences corporate environmental responsibility. Using a longitudinal data set of Chinese listed firms from 2006 to 2015, we find support that firms located in regions with a higher level of social trust engage in more environmental responsibility activities. We also show that this effect is more pronounced when local environmental protests are fewer and information transparency is worse. Our findings highlight the importance of social trust in environmental governance and provide evidence of how it serves as a substitute for formal environmental institutions in transition economies. (shrink)

Drawing on institutional and signaling theories, this study examines how environmental corporate social responsibility affects firm performance in a dysfunctional institutional environment. We extend the ECSR literature by suggesting that ECSR indirectly influences firm performance through the mediating effects of business and political legitimacy. Based on a dataset of 238 firms in China, we find that ECSR affects business and political legitimacy followed by firm performance. Moreover, legal incompleteness weakens and legal inefficiency strengthens the effects of ECSR on business and (...) political legitimacy. (shrink)

Does environmental management help foreign firms outperform local firms in emerging economies? While existing research suggests that environmental management may or may not benefit firm performance, the question is particularly under-investigated in the emerging economy context. Using the data on foreign investment into China, this study explores whether foreign firms that are under greater environmental pressure, at home or at the host, outperform comparable local firms in an emerging host country. In making this comparison, we use propensity-score matching and a (...) difference-in-differences approach to handle the problem of endogeneity inherent in comparing the performances of foreign versus local firms. We find empirical support that foreign firms perform better than local firms when they are under high environmental pressure in the emerging host country, and this result is driven by the foreign firms originating from countries with high environmental pressure. (shrink)