Impacts of ISO 14001 adoption on firm performance: Evidence from China

- We find that ISO 14001 adoption does not improve financial performance of Chinese firms.
- We find revenue and cost of firms change in similar magnitude after ISO 14001 adoption.
- We find that ISO 14001 adoption brings non-financial benefits to ISO 14001 adopted firms.

This paper investigates the impacts of ISO 14001 adoption on the performance of firms using a sample of Chinese firms. The results show that adopting ISO 14001 has insignificant impacts on the financial performance of Chinese firms. A further investigation shows that the adoption of ISO 14001 increases sales and costs of firms in similar magnitudes, thus causes insignificant net effects on the financial performance. Despite negligible financial gains, the adoption of ISO 14001 provides implicit non-financial benefits, such as promoting export and relieving coercive environmental inspections from the government.