Financing Constraints and Environmental Performance: Management in Resource Constraint Settings

Abstract

The majority of research examines the relationship between finance and the environment empirically, but they lack a comprehensive theoretical framework. To shorten this gap, we develop an analytical framework dubbed “management in resource constraint settings” and elucidate the theoretical process of finance constraints influencing environmental performance. We explore the influence of finance constraints on environmental performance of China's enterprises, as well as their possible mechanism, using financial data from A-share listed companies on the Shanghai Stock Exchange from 2010 to 2019. Our findings suggest that financial constraints can drastically reduce China’s firms’ environmental performance, and that green management is a viable channel. These discoveries are crucial for China's ecological civilization and considerable economy to develop in a coordinated manner.