How Does Environmental Corporate Social Responsibility Matter in a Dysfunctional Institutional Environment? Evidence from China

Drawing on institutional and signaling theories, this study examines how environmental corporate social responsibility (ECSR) affects firm performance in a dysfunctional institutional environment. We extend the ECSR literature by suggesting that ECSR indirectly influences firm performance through the mediating effects of business and political legitimacy. Based on a dataset of 238 firms in China, we find that ECSR affects business and political legitimacy followed by firm performance. Moreover, legal incompleteness weakens and legal inefficiency strengthens the effects of ECSR on business and political legitimacy.