Environmental policy, environmental performance, and financial distress in China: Do top management team characteristics matter?

Yasir Shahab · Collins Gyakari Ntim · Chengang Ye · Farid Ullah · Samuel Fosu

231 citations0/0 files storedBusiness Strategy and the Environment

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Corporate Social Responsibility Reporting Corporate Finance and Governance Financial Distress and Bankruptcy Prediction

Abstract

Abstract This study investigates the effect of environmental performance that is driven by good environmental policies, regulations, and management on firm's financial distress and, consequently, ascertains the extent to which top management teams' (TMTs') characteristics can moderate the environmental performance–financial distress nexus in China using 749 firms over the 2009–2014 period (i.e., generating over 3,000 individual observations). Our findings are twofold. First, our results indicate that increased environmental performance that is driven by good environmental policies tends to strategically reduce the extent of firm financial distress. Second, this nexus is moderated by TMT gender diversity, foreign exposure, and political connection. We interpret our findings within neo‐institutional, upper echelons, and risk management theoretical perspectives. The findings are robust to the use of alternative measures of financial distress, estimation techniques, and endogeneity problems.

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References

1983The Iron Cage Revisited: Institutional Isomorphism and Collective Rationality in Organizational Fields 1968FINANCIAL RATIOS, DISCRIMINANT ANALYSIS AND THE PREDICTION OF CORPORATE BANKRUPTCY 1984Upper Echelons: The Organization as a Reflection of Its Top Managers 1984Upper Echelons: The Organization as a Reflection of Its Top Managers 1983The Iron Caged Revisited : Institutional Isomorphism and Collective Rationality in Organizational Fields 2001Corporate Social Responsibility: A Theory of the Firm Perspective 1991Strategic Responses to Institutional Processes 1997THE CORPORATE SOCIAL PERFORMANCE-FINANCIAL PERFORMANCE LINK

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