Polluting Chinese manufacturers: Do their misdeeds drag down the shares of their customer companies overseas?
Manufacturer contributions to China’s poisonous rivers and life-threatening smog are well documented in the decade since the government started publicizing polluting events and safety violations. But whether environmental ignominy at Chinese businesses is a problem for the thousands of overseas companies that buy their products has been less clear. New research in the INFORMS journal Manufacturing and Service Operations Management by Hong Kong Polytechnic University’s Chris K.Y. Lo, UCLA Anderson’s Christopher S. Tang and Hong Kong Polytechnic’s Yi Zhou, Andy C. L. Yeung and Di Fan finds that Chinese manufacturers that violated environmental regulations drag down the share prices of their overseas customers even more than their own market values.