Volume 28, Issue 1 p. 54-63
RESEARCH ARTICLE

Doing well by doing good: How corporate environmental responsibility influences corporate financial performance

Yuanyuan Zhang

Yuanyuan Zhang

School of Management, University of Science and Technology of China, Hefei, China

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Zhe Ouyang

Corresponding Author

Zhe Ouyang

Department of Business Administration, Nanjing University of Finance and Economics, Nanjing, China

Correspondence

Zhe Ouyang, Department of Business Administration, Nanjing University of Finance and Economics, 3 WenYuan Road, Nanjing, Jiangsu 210023, China.

Email: zhezhe@ustc.edu.cn

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First published: 25 August 2020
Citations: 29

Funding information: National Natural Science Foundation of China grants, Grant/Award Number: 71702180

Abstract

The natural resource-based view suggests a relationship between corporate environmental responsibility (CER) and corporate financial performance (CFP), because intangible assets accrued by a firm constitute competitive advantages. However, the role of corporate reputation as a valuable intangible asset in the CER–CFP link has yet to be examined. We fill this gap by examining the effect of a firm's reputation in terms of prominence and favorability in interactively mediating the CER–CFP link. Using a sample of 10,995 firm-year observations in China, we find that CER enhances a firm's prominence and favorability, through which CER indirectly improves CFP. Additionally, the results of moderated mediation analysis indicate that the indirect effect of CER on CFP via improving prominence (favorability) is more positive and significant in high levels of favorability (prominence) than in low levels.

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