Can firm environmental performance affect stock liquidity: Evidence from Chinese A share market

CHINDICES’ environmental performance rating was used to proxy for the environmental performance of the sample companies in Chinese stock market. Portfolios analysis method and Ordinary Least Square(OLS)method was used to examine the relationship between the environmental performance and stock liquidity. Results based on the investigations indicated that firm environmental performance have a negative and significant relationship with the level of stock liquidity in whose firms with high environmental performance ratings, whereas this relationship is positive and significant in whose firms with low environmental performance rating s, and the relationship between environmental performance and stock liquidity is a inverted-U shape. This research enrich the researches on determinants of stock liquidity, and is also helpful for firms to comprehensive evaluate their environmental related decision making.