Can China’s Government Well Coordinate Market Performance and Environmental Performance of Firms?

The state-owned property of China’s firms and serious environmental issues suggest analyzing whether China’s government can well coordinate the relationship that firms’ market performance affects environmental performance. This paper designs R&D investment, corporate growth, and net profit rate to embody the profile of market performance. Based on 1609 listed firms, we analyze the key issue that as a kind of mandatory regulation, whether state-owned share can positively moderate the influence of market performance on environmental performance. Our empirical findings reveal the significantly positively influence of R&D investment on environmental performance. However, the indicators of net profit rate and corporate growth could not present such impact on environmental performance. In addition, heterogeneity test reveals that stronger state-owned share improves the impact of net profit rate and growth on environmental performance. It implies that mandatory regulation more positively influences environmental management of firms with more state-owned shares. Overall, this paper suggests China’s government to consolidate the role of mandatory regulation in environmental management.