Environmental incidents and the market value of firms: An empirical investigation in the Chinese context

摘要

With growing pollution levels in China, this study examines the impact on the market value of Chinese firms. The study analyzes reaction of the Chinese stock market to Chinese suppliers who violate certain environmental regulations, and also examines the impact of environmental incidents involving Chinese firms on the stock price of overseas customers. As Chinese firms are keen to obtain strategic resources to succeed, the article examines whether social recognition, government ownership and political ties of Chinese firms mitigate negative market reactions to environmental incidents. Data was collected from manufacturing firms, i.e., Industries C13-C43 under the China Securities Regulatory Commission classification system. Results show that there is empirical evidence on the negative impact of environmental incidents on firms' stock performance. Moreover, Chinese firms with higher recognition of social responsibility and higher government ownership share are affected considerably less. By contrast, firms with more personal political ties are impacted more after an environmental incident. Environmental incidents committed by Chinese suppliers can also have a significant negative impact on the market value of their overseas customers.