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Does It Pay to Be Green? Financial Benefits of Environmental Labeling among Chinese Firms, 2000–2005

Published online by Cambridge University Press:  15 July 2015

Lihua Wang ,
Zhiyu Cui  and
Xiaoya Liang
Lihua Wang
Affiliation:
San Francisco State University, USA
Zhiyu Cui
Affiliation:
Fudan University, China
Xiaoya Liang
Affiliation:
Fudan University, China
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Abstract

Drawing on economic, sociological, and strategic perspectives, we use data of a large sample of 936 Chinese manufacturing firms in the period from 2000 to 2005 to examine how environmental labeling may affect a firm's financial performance. We argue that reducing information asymmetry, increasing legitimacy, and differentiating strategically through environmental labeling may prompt customers to patronize the firm, thereby enhancing firm performance. However, not all firms benefit equally; environmental labeling conveys fewer benefits for larger firms and for firms listed in a stock market, because they are less threatened by information asymmetry or insufficient organizational legitimacy. Our findings suggest that environmental labeling has generally limited influence on financial performance, but for small and unlisted firms, environmental labeling increases sales.

Keywords

Chinaeconomic performanceenvironmental labelinggreen managementsustainability
Type
Special Issue Articles
Information
Management and Organization Review , Volume 11 , Issue 3: Special Issue Building Sustainable Organizations in China , September 2015 , pp. 493 - 519
Copyright
Copyright © The International Association for Chinese Management Research 2015 

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