Financing Constraints and Environmental Performance: Management in Resource Constraint Settings

e majority of research examines the relationship between nance 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 nance constraints inuencing environmental performance. We explore the inuence of nance constraints on environmental performance of China’s enterprises, as well as their possible mechanism, using nancial data from A-share listed companies on the Shanghai Stock Exchange from 2010 to 2019. Our ndings suggest that nancial constraints can drastically reduce China’s rms’ environmental performance, and that green management is a viable channel. ese discoveries are crucial for China’s ecological civilization and considerable economy to develop in a coordinated manner.


Introduction
Over the past decades, Chinese enterprises have made signi cant contributions to China's rapid economic development. However, it's not "green." High-speed expansion necessitates more energy and resource usage, which has resulted in serious ecological environmental issues [1,2]. Improving environmental performance has been a consensus as "the Belt and Road" building progresses [3]. From the micro-level, the environmental performance of enterprises is the object that needs attention.
According to a World Bank analysis, China has the greatest percentage of non-nancial listed companies reporting nancing constraints as the key impediment to their growth among 80 nations [4]. Chinese nancial market is thought to be "underdeveloped" [5]. Financial institutions only provide limited credit to Chinese enterprises. Firms' nancial decisions are in uenced by nancing constraints [6,7]. Due to nancial constraints, rms are unable to fund their projected investments, particularly in the environmental investment, a vital component of green management [6,8]. e topic is whether nancial constraints have an impact on environmental performance through green management in China. If this mechanism works, it is critical to comprehend the function of rm management in enhancing enterprises performance by resolving the problem of nancial constraints. erefore, we investigate the relationship betweennancing constraints, management, and performance. e impact of nancing constraints on environmental performance and the in uence of green management on environmental performance have been studied before. But we are interested in the impact of nancing constraints on environment performance through the indirect channel of green management. To close this gap, this research develops a comprehensive framework dubbed "management in resource constraint settings" and elucidates the theoretical process of nance constraints in uencing 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. e findings demonstrate that financial constraints will considerably reduce Chinese firms' environmental performance, with green management as the transmission variable. e rest of the paper is organized as follows. Section 2 introduces the theory development and presents the research hypotheses. Section 3 explains the research methods and empirical results. Section 4 presents the results, Section 5 is the discussion, and Section 6 presents the conclusion of the study. Figure 1 shows the organizational structure of the article.

Green Management and Performance.
With the growing recognition of environmental sustainability and protection as the emerging trends, greenmanagement has been widely concerned by enterprises and governments and hasbecome one of the crucial strategies of companies in developed and emergingmarkets since global sustainability and the awareness of environmentalprotection became trends. [9,10]. Green management, which is defined as "through continuous learning and development, and by accepting environmental goals and strategies that are fully integrated with organizational goals and strategies, apply innovation to achieve sustainability, waste reduction, social responsibility and competitive advantage [11]," is becoming more closely linked to a company's financial [12] and environmental performance [13]. Green management's major purpose is to protect natural resources and the environment as well as to boost resource and operational efficiency [14].
Enterprises are motivated to improve their environmental performance. e Porter hypothesis (PH) is based on the idea of achieving good corporate environmental performance through long-term incentives [15]. Researchers have looked at the "green" motive of businesses from a variety of perspectives in recent years, whereas they focused more on consumer preferences and the spillover effect [16]. Previous research, such as Wesseh and Lin's, has suggested that high environmental performance helps businesses gain a competitive edge and improve their economic performance [17,18].
However, the resource-based view (RBV) rationale holds that a senior management team's dedication to tackle ecological challenges is "worthy," but "rare," "high imitation cost," and "irreplaceable" [19]. It is also widely accepted that senior management support for environmental issues leads to improved environmental performance over time [20]. e factors used to evaluate a company's environmental performance include pollution reduction, recycling programs, and waste minimization [21]. Almost every industry has recently implemented green management methods, which were efficient waste treatment and timely disposal of hazardous chemicals,to demonstrate enhanced productivity [20]. is phenomenon is due to the worldwide awakening that motivated ASEAN (Association of Southeast Asian Nations) countries and forced businesses to becomemore ecologically conscious during the 1970s [22]. e RBV believes that thepeak of enterprises' comprehensive performance and a firm's resources (physical, human, and organizational capital)is decided by the degree to which an organized system holds and controls suchresources [23], and a firm's resources comprise physical, human, and organizational capital. Organizational capital reflects the firm's reporting structure and procedures and relationships between units within the enterprises and throughout their surroundings. When a company's resources enable it to "conceive of and implement plans that raise the productiveness and validity of the organization," it is said to be "valuable" [23]. us, organizational capital is supposed to be one of the most essential intangible resources, despite the fact that thereare various resources in an enterprise. erefore, in this essay, greenmanagement, a beneficial organizational resource that contributesto improved environmental performance, shows its validity through itsperformance.

Management in Resource Constraint Settings.
Traditional industries' ecological evolution and the establishment of late-model green ecological industries require financial support [24,25]. Credit limitations, illiquidity, and the inability to borrow or issue shares are all examples of financial constraints that inhabit enterprises from funding their projected investments [26,27]. By altering the optimal allocation of production inputs, financial constraints are likely to influence enterprises' real activities and investment decisions [28,29]. erefore, financingfeature in enterprises' environmental investment, which is a fundamentalresearch topic of finance, ecological civilization, and substantial economy. Organizations can invest strategically in the production components required to improve environmental performance when they have access to financial resources. Enterprises, on the other hand, frequently encounter financial barriers to accessing the capital market, which inhibits their growth.
is is because they must prioritize productive investment, firms with greater budgetary constraints tend to invest more in tangible assets rather than intangible assets [30][31][32].
On the other hand, most studies show that enterprises generally have external financing constraints [4,33]. Environmental investment, one of the important strategies of green management, will increase the operating cost of enterprises, and its short-term income is not high [34]. erefore, it is much more difficult for companies to take environmental performance into account [35]. ey often reduce voluntary environmental investment to ensure financial performance, which probably hinders the effective treatment of environmental pollution [36,37]. Furthermore, , severalresearch works on the impact of development financeon carbon footprint has beenshown so far [38,39].
Lahiani [40] discovered that China benefitedfrom the development of finance, which could be seen in less emission of CO 2 and the enhanced ecological quality. According to Zhao and Yang [41], the development of finance has distinct impacts on CO 2 footprint. It has also been found that financial development is capable of lowering footprintof different ecological indexes such as the effluent economy and nitrogen oxides [40,42]. However, few studies pay attention to the problem thatcompanies' investment in green management would be limited if they have financial constraints.
is study attemptsto investigate the influence of financing constraints on environmental performance of Chinese enterprises and its potential channel. erefore, it is vital to find out whether financing constraints will affect the effectiveness of green management, that is, environmental performance, and whether environmental investment in green management is an intermediary.
Above all, this paper makes the following assumptions.

Hypothesis 1.
Financing constraints significantly affect environmental performance.
Hypothesis 2. Financing constraints significantly affect green management.
Hypothesis 3. Green management significantly affects environmental performance.

Hypothesis 4.
Financing constraints significantly affect environmental performance through green management. Figure 2 shows the conceptual model of these hypotheses.

Environmental Performance.
e measurement indicators of environmental performance are largely divided into two categories in extant research. Laosirihongthong [43], who is one of the representatives, used a questionnaire to separate environmental performance into many indicators. Liu [44],another representative, divided environmental performance into two main categories: behavior level (activity-oriented action) and capability competency (management-oriented performance). e result of environmental activity level and environmental management competence equals total environmental performance. Due to the information disclosure and data availability of listed companies and the current environment governance in China, this paper in general uses the second method to analyze the environmental behavior level and capability competency of listed companies.
As a result, the environmental performance in this research is divided into two categories: environmental activity level and environmental institutional organization. e former is pollutant treatment and cleaner production. e latter is the content of the company's environmental management, which is separated into two dimensions: monetary indicators, which include a series of environmental protection spending, tax, and income, and non-monetary indicators, including environmental disclosure information, and so on. To measure the success of the company's green management, the score of environmental activities is multiplied by the average score of environmental institutional arrangements to get environmental performance. Figure 3 shows the environmental performance evaluation process.  [48], and the WW index [49] are some of the most widely used financial constraint measurement methodologies in the United States and overseas. e FHP approach was first proposed earlier, and numerous literature studies in China have used it. However, there are several inconsistencies in the implementation of the FHP approach [47]. e WW index eliminates the need for pregrouping of companies and the use of the Tobin Q value, which requires variables from company reports and market data, and the data are readily available [49]. As a result, the WW index will be used as the agent of financing constraints in this work. According to WW index [49], the formula is as follows:

Models and Variables
(1) C is the rate of cash flow to assets. When dividends are distributed, D assigned a value of 1 is a dummy variable. e rate of long-term liabilities to assets is LTD. L is logarithmic treatment of total assets, and I is the trade where the enterprise is located. S stands for the enterprises' sales growth ratio. e higher the WW index, the more severe the financial limitations faced by businesses.

Mediating Variable.
e company's publicly available environmental investment data consist primarily of environmental spending. is study uses the logarithmic form of the current amount of environmental protection spending as the agency volume for better regression analysis.

Control Variable.
Many researchers believe the level of firms' financing constraints has remarkable difference in China considering listed firms' varying scale and age [50,51], because it issupposed that these corporates areriskier with respect to default probability and information hazard when being in the capital market [52][53][54][55]. As a result, the control variable sequence in this research includes the years of establishment and the size of the businesses. e establishment years are calculated using the company's reported establishment period, and the logarithm of the enterprise asset scale is used as the control variable (see Table 1).

Descriptive Analysis.
e maximum and minimum values, mean values, and standard deviations of variables are listed in Table 2.
ere are some variances in financing constraints among businesses in the sample, but they are not substantial. e environment investment that businesses encounter is largely comparable due to the immature development of China's financial market. Furthermore, there are some variances in environmental protection spending among businesses, but they are minor. Meanwhile, the sample data have an atypical distribution, the difference in environmental performance sample data between businesses is not statistically significant, and the mean value is low. It demonstrates that Chinese firms' investments in ecological protection are limited due to policy restraints, a lack of passion to improve the company's environmental performance, and a low and concentrated environmental performance score. Before regression analysis, the values of the sample data of each variable in Table 2 were treated by subtracting the mean value to solve data centralization. In addition, there is a violent reverse side relationship between financial constraints and environmental investment and performance. Environment investment has a negative correlation with financial restrictions and a positive correlation with environmental performance. It makes environmental investment statistically significant as an intermediary variable indicator of the influence of funding restrictions on environmental performance.

Results
Under the 95% confidence interval, the results of main effect test and the intermediary effect test are expressed in Table 3 and Figure 4. e test result of the main effect result is valid, indicating that financing constraints indeed significantly influence the environmental performance. us, Hypothesis 1 is valid. e test intervals of financing constraints on green management and green management on environmental performance are effective. erefore, Hypothesis 2 and Hypothesis 3 are valid. According to the test results of intermediary effect, the indirect effect suggests the intermediary effect of green management is valid, and the effect value is −0.3756. In addition, after controlling the intermediary variable green management, the direct impact of independent variable financing constraints on dependent variable environment performance is also significant. us, Hypothesis 4 is valid. Overall, the test results show that green management plays an intermediary role and is the only intermediary variable, that is, the complete intermediary variable.

Discussion
Using a large-panel information set of Chinese listed enterprises, we discover that financial constraints are crucial factors influencing firm green management and its performance. When financial constraints become Mobile Information Systems more severe, the likelihood of company environmental investment decreases. Moving towards a lower level of financial constraints is likely to improve environmental performance. Financial constraints are considered a market selection mechanism that will stifle the company's growth prospects.
is paper investigates the relationship between financial constraints and ecological protection. e findings show that, similar to previous study, financial constraints have a significant direct effect on environmental performance, but there is an intermediary variable in the form of green management. Previous study has not explicitly considered the   Age Years from establishment to 2019 Annual report of listed companies X 5 Scale � logarithm of enterprise asset scale Annual report of listed companies Much of the risk associated with environmental investment can be spread out over a larger area. As a result, digital finance helps top management overcome their funding challenges, thereby promoting the environmental performance as a whole.

5.2.
eoretical Significance. Previous research mainly looked at the direct impact of financial constraints on environmental performance but did not go into details of the impact channel. We examine an influence mechanism between financing constraints and environmental performance, offer a new perspective on "management in a resource constrained environment," and recognize that poor environmental performance of companies may be due to a lack of environment investment in green management, which is primarily influenced by financing constraints. As a result, it is decided that if the company wants to improve its environmental performance, it would require not only internal green management improvements but also financial market support. is is to fill in the gaps in existing literature study on increasing listed firms' environmental performance.

Practical Significance.
e results of this paper provide vital enlightenment for listed companies and decision makers. Firstly, the research framework of this paper aims to guide listed companies on the influence of investment on environmental performance. Listed companies can use the new research framework of environmental performance to enhance their environmental performance by increasing the proportion of environmental protection investment, doing an excellent job in waste gas and wastewater emission reduction, solid waste utilization and disposal, noise, light pollution, radiation, and other treatment and cleaner production, and improving the quality of environmental information disclosure.

Conclusion
Researchers have discussed the relationship between finance and environment empirically; however, there is no comprehensive framework. In this paper, we develop an analytical framework and elucidate the theoretical process of financial constraints influencing environmental performance. We used financial data form a group of companies in Shanghai Stock Exchange that published green management and environmental performance and explored the influence of finance constraints on environmental performance of the enterprises. When financial constraints become more severe, the likelihood of company environmental investment decreases. Moving towards a lower level of financial constraints is likely to improve environmental performance. is research work suggests that finance constraints can reduce the environmental performance of these enterprises, and the green management is a viable channel.
Data Availability e datasets used during the current study are available from the corresponding author on reasonable request.

Conflicts of Interest
e authors declare that they have no conflicts of interest.