Voluntary environmental governance and firm performance: the role of the green factory construction policy in China

The question of whether, and through which mechanisms, voluntary environmental governance effectively enhances corporate productivity-related sustainability remains a subject of ongoing academic debate. Synthesizing insights from Institutional Theory, the Resource-Based View, and the Porter Hypothesis, this study investigates how a voluntary environmental governance program affects firm productivity. This study employs China’s Green Factory Construction (GFC) policy to empirically examine the influence of quasi-voluntary environmental governance on corporate total factor productivity (TFP). The empirical findings indicate that the GFC policy significantly elevates corporate TFP, a primary inference which holds under extensive robustness scrutiny. The policy enhances TFP by amplifying revenue incentives, fostering technology innovation, and optimizing resource allocation. Moderation analysis indicates a significant positive effect of internal managerial environmental attention and public environmental attention on the policy-TFP relationship. Heterogeneity assessment reveals more salient policy impacts among state-owned and pollution-intensive firms. This study enriches the assessment framework for voluntary environmental regulation efficacy, deepens theoretical understanding of its economic value, and contributes to the literature on corporate TFP determinants. These findings provide policy-relevant evidence for developing economies seeking to design voluntary environmental governance instruments that support productivity-related sustainability.