Does corporate green investment enhance profitability? An institutional perspective

Figures & data

Figure 1. Yearly number of listed companies made green investment in China made by Chinese listed companies.

Source: Authors calculation based on the data obtained from CSMAR.

Table 1. Definitions of all the variables of the study.

Variable	Symbol	Operational definitions
Firm Profitability	ROA	It is measured as the rate of return on total assets.
Green Investment	CGI	It is calculated as the ratio of value of firm green investment to total assets at the end of each year.
Environmental Policy	POLICY	It is a dummy variable representing value '1′ if year is equal to or greater than 2015 (year when environmental policy was implemented) and '0′ otherwise.
Regional Development	RGDP	It is measured as the natural logarithm of the provincial GDP per capita.
Environmental Industry	INDENV	A dummy variable denoted as '1′ if firm belongs to environmentally sensitive industrial sector and '0′ otherwise.
Environmental Performance	ENVP	It is measured using HEXUN-environmental ratings for Chinese companies ranges from '0′ to '100' .
Firm Size	SIZE	It is measured as the natural logarithm of total assets of the firm at year end.
Firm Age	AGE	It is calculated as the difference between the current year and firm's IPO (Initial Public Offerings) date.
Firm Leverage	LEVG	It is measured as the ratio of total liabilities to total shareholders equity.
Fixed Asset	FAR	It is the calculated by dividing firm's total sales to net fixed assets.
Board Size	BSIZE	It is the logarithmic value of number of directors presented on board.
Board Independence	BIND	It is measured as the ratio of number of independent directors to total directors presented on corporate board.
Institutional Ownership	INSHR	It is measured as the number of institutional investors shares to total shares of the firm.

Source: Authors calculation based on the empirical analysis of the paper.

Table 2. Descriptive statistics.

Variable	N	Mean	Std. Dev.	Min	Max
ROA	2,290	0.043	0.052	0.147	0.195
ROE	2,202	0.080	0.106	0.317	0.447
CGI	2,290	0.005	0.006	0.000	0.017
ENVP	2,290	24.720	29.096	0.000	90.000
POLICY	2,290	0.493	0.500	0.000	1.000
RGDP	2,290	11.052	0.472	9.482	12.009
INDENV	2,290	0.409	0.492	0.000	1.000
SIZE	2,290	23.237	1.428	20.451	26.048
AGE	2,290	12.229	6.639	0.000	25.000
LEVG	2,290	1.292	1.129	0.084	5.912
FAR	2,290	0.286	0.172	0.012	0.706
BSIZE	2,290	2.202	0.204	1.609	2.708
BIND	2,290	0.376	0.059	0.333	0.571
INSHR	2,290	56.743	22.432	1.780	91.685

Note: For variables definitions see Table 1.

Source: Authors calculation based on the empirical analysis of the paper.

Table 3. Pairwise correlation matrix.

Variables	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)	(10)	(11)	(12)	(13)	(14)
(1) ROA	1
(2) ROE	0.760*	1
(3) CGI	0.061*	0.016	1
(4) POLICY	0.028	−0.014	0.085*	1
(5) RGDP	0.031	0.044	−0.024	0.351*	1
(6) INDENV	−0.031	−0.03	0.05	−0.028	−0.094*	1
(7) ENVP	0.041	0.080*	−0.098*	−0.442*	−0.295*	0.064*	1
(8) SIZE	0.069*	0.062*	−0.113*	−0.049	0.086*	0.139*	0.019	1
(9) AGE	−0.165*	−0.088*	−0.03	0.119*	−0.002	0.153*	−0.125*	0.243*	1
(10) LEVG	−0.437*	−0.263*	−0.088*	−0.141*	−0.079*	0.005	0.052	0.473*	0.160*	1
(11) FAR	0.152*	−0.173*	0.239*	−0.056*	−0.144*	0.128*	0.038	0.087*	0.059*	0.049	1
(12) BSIZE	0.011	0.034	0.01	−0.161*	−0.154*	0.101*	0.109*	0.210*	0.087*	0.100*	0.128*	1
(13) BIND	−0.011	0.034	−0.065*	0.005	0.081*	−0.088*	−0.023	0.131*	−0.034	0.061*	−0.099*	−0.417*	1
(14) INSHR	0.068*	0.100*	−0.090*	−0.198*	−0.02	0.074*	0.086*	0.494*	0.121*	0.184*	0.095*	0.165*	0.070*	1

*** p < 0.01, ** p < 0.05, * p < 0.1.

Source: Authors calculation based on the empirical analysis of the paper.

Table 4. Regression results based on LSDV.

Variables	ROA	ROA	ROA	ROA
	(1)	(2)	(3)	(4)
CGI	0.4902***	0.0902	8.6789**	0.8884***
	(0.1699)	(0.2266)	(3.3977)	(0.2062)
POLICY		0.0239***
		(0.0058)
CGI*POLICY		1.1222***
		(0.3122)
RGDP			0.0062**
			(0.0027)
CGI*RGDP			0.8294***
			(0.3065)
INDENV				−0.0012
				(0.0025)
CGI*INDENV				−0.4996
				(0.3193)
ENVP	0.0001***	0.0001***	0.0001***	0.0001**
	0.0000	0.0000	0.0000	0.0000
SIZE	0.0095***	0.0096***	0.0095***	0.0068***
	(0.0010)	(0.0010)	(0.0010)	(0.0009)
AGE	−0.0009***	−0.0009***	−0.0009***	−0.0008***
	(0.0002)	(0.0002)	(0.0002)	(0.0001)
LEVG	−0.0232***	−0.0232***	−0.0231***	−0.0233***
	−0.0012	−0.0012	−0.0012	−0.0011
FAR	0.0563***	0.0569***	0.0552***	0.0513***
	(0.0070)	(0.0070)	(0.0070)	(0.0059)
BSIZE	0.0074	0.0077	0.0068	0.0030
	(0.0052)	(0.0052)	(0.0052)	(0.0053)
BIND	−0.0427**	−0.0437***	−0.0411**	−0.0272
	(0.0168)	(0.0167)	(0.0167)	(0.0169)
INSHR	0.0002***	0.0002***	0.0002***	0.0002***
	0.0000	0.0000	0.0000	0.0000
Constant	−0.0737**	−0.0761**	−0.0300	−0.0266
	(0.0370)	(0.0369)	(0.0400)	(0.0324)
Industry FE	Yes	Yes	Yes	No
Year FE	Yes	Yes	Yes	Yes
Observations	2,290	2,290	2,290	2,290
R-squared	0.3347	0.3386	0.3366	0.2919

Robust standard errors in parentheses

*** p < 0.01,

** p < 0.05,

* p < 0.1.

Source: Authors calculation based on the empirical analysis of the paper.

Table 5. Robust regression results based on LSDV.

Variables	ROE	ROE	ROE	ROE
	(1)	(2)	(3)	(4)
ERI	1.0487***	0.1196	15.8724**	1.7846***
	(0.3667)	(0.5012)	(7.4498)	(0.4822)
POLICY		0.0499***
		(0.0139)
ERI*POLICY		2.3722***
		(0.6648)
RGDP			0.0045
			(0.0059)
ERI*RGDP			1.5330**
			(0.6714)
INDENV				−0.0035
				(0.0053)
ERI*INDENV				−1.2347*
				(0.6785)
ENVP	0.0003***	0.0003***	0.0003***	0.0003***
	(0.0001)	(0.0001)	(0.0001)	(0.0001)
SIZE	0.0215***	0.0217***	0.0214***	0.0177***
	(0.0023)	(0.0023)	(0.0023)	(0.0024)
AGE	−0.0011***	−0.0011***	−0.0011***	−0.0008**
	(0.0003)	(0.0003)	(0.0003)	(0.0003)
LEVG	−0.0353***	−0.0352***	−0.0351***	−0.0334***
	(0.0035)	(0.0035)	(0.0035)	(0.0032)
FAR	0.1114***	0.1130***	0.1095***	0.1184***
	(0.0154)	(0.0153)	(0.0154)	(0.0139)
BSIZE	0.0058	0.0054	0.0069	0.0119
	(0.0114)	(0.0115)	(0.0114)	(0.0114)
BIND	−0.0199	−0.0225	−0.0172	−0.0094
	(0.0363)	(0.0364)	(0.0363)	(0.0366)
INSHR	0.0002**	0.0003**	0.0002**	0.0002**
	(0.0001)	(0.0001)	(0.0001)	(0.0001)
Constant	−0.3249***	−0.3303***	−0.2443***	−0.3027***
	(0.0796)	(0.0793)	(0.0870)	(0.0717)
Industry FE	Yes	Yes	Yes	No
Year FE	Yes	Yes	Yes	Yes
Observations	2202	2202	2202	2202
R-squared	0.2345	0.2387	0.2361	0.2015

Robust standard errors in parentheses

*** p < 0.01,

** p < 0.05,

* p < 0.1.

Source: Authors calculation based on the empirical analysis of the paper.

Table 6. Regression results based on 2sls.

Variables	ROA	ROA	ROA	ROA
	(1)	(2)	(3)	(4)
CGI	0.6686***	0.0886	10.6304**	1.0024***
	(0.2382)	(0.2730)	(4.7494)	(0.3001)
ENVP	0.0001	0.0001	0.0001	0.0001
	(0.0003)	(0.0003)	(0.0003)	(0.0002)
POLICY		0.0162
		(0.0148)
CGI*POLICY		1.2080***
		(0.4122)
RGDP			0.0070*
			(0.0039)
CGI*RGDP			1.0195**
			(0.4279)
INDENV				−0.0005
				(0.0036)
CGI*INDENV				−0.4694
				(0.4270)
SIZE	0.0112***	0.0114***	0.0112***	0.0076***
	(0.0013)	(0.0013)	(0.0013)	(0.0013)
AGE	−0.0009***	−0.0008***	−0.0009***	−0.0006***
	(0.0002)	(0.0002)	(0.0002)	(0.0002)
LEVG	−0.0237***	−0.0236***	−0.0236***	−0.0228***
	(0.0015)	(0.0015)	(0.0015)	(0.0015)
FAR	0.0563***	0.0569***	0.0541***	0.0507***
	(0.0107)	(0.0107)	(0.0107)	(0.0083)
BSIZE	0.0150**	0.0152**	0.0142**	0.0051
	(0.0066)	(0.0066)	(0.0066)	(0.0069)
BIND	−0.0212	−0.0229	−0.0203	−0.0066
	(0.0221)	(0.0219)	(0.0220)	(0.0225)
INSHR	0.0002**	0.0002**	0.0002**	0.0002**
	(0.0001)	(0.0001)	(0.0001)	(0.0001)
Constant	−0.1269**	−0.1341**	−0.0754	−0.0737
	(0.0587)	(0.0586)	(0.0611)	(0.0477)
Industry FE	Yes	Yes	Yes	No
Year FE	Yes	Yes	Yes	Yes
Observations	1185	1185	1185	1185
R-squared	0.3459	0.3505	0.3485	0.2851
Kleibergen-Paap rk LM statistic	44.068	44.100	44.183	50.832
Cragg-Donald Wald F statistic	90.604	90.431	90.266	103.751
Kleibergen-Paap rk Wald F statistic	52.963	52.787	52.920	63.300
Stock-Yogo weak ID test critical values (10% maximal IV size)	16.38	16.39	16.40	16.41

Note: Robust standard errors in parentheses

*** p < 0.01,

** p < 0.05,

* p < 0.1.

Source: Authors calculation based on the empirical analysis of the paper.