ENGO geographical proximity and corporate environmental performance

Abstract

Building on economic geography and institutional theory, we examine how ENGO proximity may affect a firm's environmental performance. To conduct our study, we have manually gathered the precise location data of 5,510 ENGOs in China. We find companies that have ENGOs in close distance exhibit better environmental performance; however, this impact becomes less discernible when the distance exceeds 100 km. The mechanism analysis suggests that ENGO proximity is conducive to increasing corporate information transparency, which in turn promotes corporate environmental performance. We further observe that the positive association between ENGO proximity and corporate environmental performance is more pronounced for firms that are located in cities with weaker government environmental focus, have more media visibility, are state-owned, or are larger in size. In summary, our research underscores the pivotal role of ENGOs in corporate governance and emphasizes the geographical constraints of their impact. We also offer some suggestions for environmental policymakers.