Chinese civilization originated from the practice of farming, which in its early days had primitive approaches and low productivity; in particular, the harvest of crops depended entirely on natural conditions such as geography and climate. Therefore, the relationship between humans and the natural environment was necessarily closer than it is in the modern era, and the early wise men were concerned with the concept of ecology nonetheless. After being developed gradually through Taoism and Buddhism, the “Tian-ren-he-yi” belief system was integrated into the daily life of Chinese people. The understanding and advocacy of this sensitive relationship between human beings and nature constitute ecological ethics in traditional Chinese religion and culture. The basic meaning of “Tian-ren-he-yi” is summarized as follows: First, human beings and other life-forms are a part of nature (i.e., all life in the natural system has its inherent value and has the right to live). Therefore, all forms of life are equal, and human beings cannot destroy the natural habitat without considering a moral limitation. Furthermore, moral principles are consistent with the laws of nature; therefore, human beings can properly and readily resolve the relationship between their interests and the interests and development of other life-forms in the world. There is no dilemma (or dichotomy) between ecology and ethics: human beings are able to develop their interests in harmony with nature, and they ought to do so. In a phrase, it means “the nature and mankind combined as one” or “nature-human harmony” (Peng et al., 2016).

Religious culture is the product of social norms that lead to the construction of informal systems. As such, religious culture has a measurable impact on human behavior, and it plays a macro-role in regulating society, economy, and life-processes (Williamson, 2000). Religion provides guidance and clarity for the goals and activities pursued by humankind, which shapes the mindset and behavior of the faithful (Ip, 2009). At the same time, the institutional attribute of religion fills in the behavior of humans with more specific details and regulations, thus forming an implicit and informal constraint on human behavior (and also exercising “soft power” invisibly but comprehensively; Du et al., 2015). We believe that the “Tian-ren-he-yi” belief system can influence the corporate environmental performance in the following ways:

First, the “Tian-ren-he-yi” belief system exerts the “soft power” that restrains and regulates human behavior.

The Taoist concept of “Tian-ren-he-yi” considers that man and nature are a unified “whole.” Pursuit of harmonious coexistence is not a matter of applying rational thinking, but rather a matter of the way, humans experience their existence. Furthermore, human beings benefit from a commitment to harmony and charity if they wish to maintain harmony between the whole of nature and its life-forms. Taoism promotes the practice of respecting and revering nature, thus inspiring people to respect and protect nature from over-exploitation. Taoism likewise believes that all life-forms are equal so human beings should respect other life-forms and make use of them with limitation, which is a typical embodiment of ecological thought and practice. Those who kills the goose that lays the golden eggs will sink themselves and others into a boundless desire for material enjoyment that will bring them nothing but danger. Taoism firmly advocates that people take action to protect nature: The Taoist classics warn their readers that burning mountains and polluting land lead to the destruction of vegetation. Furthermore, the classics also stipulate on how to protect land and water resources, such as not destroying mountains and rivers without restrictions; Taoism prohibits its followers from throwing any contaminants in the water. This is the fundamental idea of environmental protection.

The Buddhist concept of “Tian-ren-he-yi” holds that human beings and other life-forms are closely related, and that the individuals and their surroundings are complementary but inseparable. Furthermore, Buddhism strictly forbids its believers from harming others for their private interests. The Buddhist classics say as: “The earth has the same root of people, and all life-forms are on par with people,” which is a typical expression of ecological holism through Buddhism. Buddhist beliefs firmly hold to cause-and-effect transmigration, which means that if someone treats nature recklessly and abuses natural resources, then this person will reap the consequences of their actions. The doctrine of “Tian-ren-he-yi” encourages its followers to show mercy to sentient life and to not pollute the environment, instead, humans should do more to protect the natural ecology. Buddhism is mindful of self-restraint and the reduction of material needs on the part of its followers; it is excessive greed that has led to man’s unlimited desire to exploit nature.

Social norms that are formed by religion’s interaction with human culture can be considered factors that affect the behavior of individuals within each religious or cultural domain (Conroy and Emerson, 2004; Ghoul et al., 2012). As a part of religious culture, the belief system has deep impact on its believers. Such an eco-ethical notion can promote environmental values within corporations and increase the importance of environmental issues to decision makers. We believe that increased environmental awareness will motivate companies to propose protections that are beneficial to the environment and ultimately improve their environmental performance. Based on the “social identity theory,” the social norms originated and conducted by religions can lead to group-level common behaviors (Tajfel, 1986), that is to say, the norms in the groups greatly shape individual characteristics. McGuire et al. (2012) also argued that, regardless of whether the executives believe in religion, religion has influence on their attitudes, judgments, and decisions. Even if they were not religious believers in the enterprise, the “Tian-ren-he-yi” belief system can put external pressure on companies by fostering public advocacy campaigns and creating a regional cultural environment that is conducive to ecological thinking. Companies are bound to adopt environmental values to gain social acceptance, which affects their environmental performance.

Second, the “Tian-ren-he-yi” belief system exerts a “better vision,” which demonstrates the excitation power of religious culture.

Both Buddhism and Taoism describe an ideal notion for their believers to advocate. The ideal as described by Buddhism is that the follower will find nirvana and achieve paradise after the end of life: the paradise is orderly, beautiful, and peaceful. The ideal as described by Taoism is that the followers of Taoism enter an immortal world after practicing their discipline: a world in which there are no worries but only happiness and ecological balance. The religious culture encourages the believers to act conscientiously and work hard during their life in order to cultivate themselves to attain righteousness and enter the Elysian Fields. At the same time, the believers are encouraged to commit to the vision of “an earthly paradise” and build a better world through their efforts when they are in this life on Earth (Cooper and James, 2017). We believe that the concepts of environmental protection and restoration of damaged ecosystems (which are promoted by Buddhism and Taoism) will motivate companies to increase their environmental protection efforts and increase their investment in green technology. These actions ultimately promote the environmental performance of companies.

Based on the above exposition, we formulate the following hypothesis 1:

We used a research sample that includes all Chinese A-share listed manufacturing companies whose information was printed from 2008 to 2018. We used the following parameters to screen the sample: (1) we excluded companies from firm-year observations that have transaction statuses of special treatment (ST), suspension from trading (*ST), or particular transfer (PT). (2) We removed companies from firm-year observations if any variables in the main regression model are missing. The final sample consists of 6,346 firm-year observations. The financial data used in this paper were obtained from the CSMAR database, and the religious data were collected manually based on the Report on the Identification of National Key Buddhist and Taoist Temples in Han Areas that was issued by the People’s Republic of China on April 9, 1983. All of the continuous variables listed are winsorized at the 1% level.

To test hypothesis H1, we construct the following model by referring to Clarkson et al. (2008) and Walls et al. (2012):

In the above model, the dependent variable CEP is a proxy variable for the level of corporate environmental performance, the independent variable REC is a proxy variable for the degree of religious and cultural influence. In this model, industry and year-effects are controlled and ε is the residual. The regression coefficient α₁ indicates the degree of influence of religious culture on corporate environmental performance. If α₁ is positive and statistically significant, it indicates that the “Tian-ren-he-yi” belief system promotes better corporate environmental performance.

Table 2 reports the descriptive statistics for all variables that were used in this study. As shown in Table 2, the average of CEP is 1.292, which contains a minimum value of 0 and a maximum value of 2.079, thus indicating that corporate environmental performance can be improved. REC had an average value of 2.935, a minimum of 0, a standard deviation of 0.925, and a maximum of 4.771. The relatively large SD of REC indicates that there is a wide variation in the distribution of religious culture, which forms the basis for our study. The remaining variables are not further described.

Table 3 lists the Pearson correlation coefficients of major variables. The results show that the correlation coefficients between CEP and REC are positive such that they are statistically significant at the 5% level.

The previous hypothesis predicted that a religious culture that promotes “Tian-ren-he-yi” will improve corporate environmental performance. Table 4 reports the OLS regression results. To address a concern about potential serial correction problems associated with unbalanced panel data, we computed and reported all t- values using robust SEs adjusted for clustering at the firm-level.

As shown in column (1), the coefficient of REC is positive such that it is statistically significant at the 5% level. When a series of relevant control variables are added, the regression coefficient of REC remains positive and statistically significant at the 1% confidence level (column 2). This indicates that religious culture improves corporate environmental performance and that the more Buddhist and Taoist monasteries in where the firm is registered, the better environmental performance there will be, verifying Hypothesis 1.

During the Qing Dynasty, the Confucian classics became the official textbook for the imperial examinations, and the scholars naturally became the propagators of “Tian-ren-he-yi” belief system. In the Qing Dynasty, the printing and publication of books were basically carried out by the official printing bureaus. Due to the imbalance of the geographical distribution of the official printing bureaus and the inconvenient transportation, there were differences in the circulation of books in different regions, and thus, there were differences in the dissemination of the “Tian-ren-he-yi” belief system. After entering modern society, these printing bureaus were closed down due to the impact of advanced Western publishing technologies. Therefore, there is no direct relationship between these printing bureaus and the corporate environmental performance, satisfying` the conditions of correlation and exogeneity. So we add the official printing bureaus (OPB) of the Qing Dynasty as the instrumental variable. According to the test results in Table 5, there is a positive correlation between instrumental variables and explanatory variables, at the 1% confidence level, predictive explanatory variables and explained variables are also significantly and positively correlated, which indicates that religious culture can promote corporate environmental performance.

The model was regressed by staggering control variables at stages to exclude control variables from playing a determinant role in the regression results. To further ensure the reliability of the main findings and to avoid conclusions formed by pure chance, we performed the following robustness tests.

We have demonstrated the positive effect of religious culture on corporate environmental performance. In this section, we discuss the underlying mechanisms by which religion improves corporate environmental performance.

The rising global competition demands corporates to be more economically competitive. Meanwhile, the natural environment seems to deteriorate around the world and protecting the environment demands more attention. Obviously, both economic performance and environmental performance are important (Porter and Kramer, 2011). The dilemma is as: How do firms reconcile these different performance dimensions? If the corporations have only embraced an economically oriented strategy, in their pursuit for economic performance, they end up significantly polluting the environment. In existing studies, scholars have confirmed that corporate executives will overinvest in their companies under the pressure of meeting economic performance indicators (Kuusela and Maula, 2016). The long-term consequence of overinvestment is to ensure competition for natural resources and bring pollution and destruction to the environment. The “Tian-ren-he-yi” belief system insists that believers ought to understand the laws of nature and master moral limits when using natural resources. It avoids the polarization of dangerous extremes, such as too much emphasis on human needs or too little emphasis on the environment. This “ecological ethical connotation” will inevitably guide the behavior of believers and alleviate the utilitarian pursuit of economic benefits by the shareholders of companies (i.e., at the expense of the environment), thus relieving management of pressure to meet environmental performance indicators. At the same time, the “Tian-ren-he-yi” belief system shapes a corporate culture that promotes environmental protection and reduces the disagreement and friction among stakeholder parties in protecting the environment. In this way, corporations will respond more positively to ecological protection and make decisions that are friendly to the environment, such as by increasing investment in environmental protection in order to improve their environmental performance.

To verify the mechanisms, we follow Ma et al. (2019) to classify firms into two groups according to management economic performance pressure and regress them separately. A firm is defined as being in the group with high pressure if the firm’s average price-to-earnings ratio predicted by analysts is greater than the predicted annual industry median. The regression results are listed in Table 7. As shown in columns (1) and (2), the regression coefficient of REC is significantly positive only in the group with high pressure. It indicates that the impact of the belief system on corporate environmental performance is partly channeled by alleviating the pressure of management performance. Moreover, we also classify firms into two groups according to corporate environmental investment and regress them separately. The regression results are listed in Table 7. As shown in columns (3) and (4), the regression coefficient of REC is significantly positive only in the group with less corporate environmental investment. It indicates that the impact of the belief system on corporate environmental performance is partly channeled by increasing corporate environmental investment. To sum up, the “ecological ethics” contained within the traditional Chinese religions of Buddhism and Taoism alleviates the pressure of performance on the part of executives to reduce degradation to the environment through external regulation. At the same time, ecological ethics also help to increase the firms’ environmental investment in order to repair the natural environment (i.e., through internal regulation). The two channels work together to improve the corporate environmental performance.

Williamson (2000) documents four levels of “Social Analysis,” in which religion lies in the first and embedded level, the governance structures with transactions in third. Generally speaking, religion complements market governance mechanism. The introduction of external supervision can act as a restraint on management behavior through reputation maintenance and pressure mechanisms. When the intensity of external supervision increases, when a company has environmental problems, they can be easily detected and quickly transmitted to the outside world, thus damaging the company’s image and social reputation. To save corporations reputations, executives are bound to pay attention to environmental protection and make moves to improve corporate environmental performance. That is, external monitoring can weaken the role of religious culture in improving corporate environmental performance. Du et al. (2015) also show that religiosity can curtail unethical behaviors of managers, while this relationship is attenuated for firms with better external monitoring mechanisms. As an important information intermediary in the capital market, analysts play an important role in external supervision, and analysts’ attention to companies is an important supervisory force. Therefore, this paper classifies firms into two groups according to analysts’ concerns as being subject to strong and weak external monitoring, and we regress them separately. A company is defined as being in the group with stronger external oversight if the number of analysts it follows is greater than the median industry-annual number of analysts who follow it. The regression results are listed in Table 8. As shown in columns (1) and (2), the regression coefficient of REC is significantly positive only in the group with weak external oversight. It indicates that the impact of the belief system on corporate environmental performance is more efficacious when the enterprises are under weak external supervision.

Both formal and informal systems are fundamental parts of the disciplinary approach in management, which plays an important role in the behavior and decision making of senior staff. Their decisions may be complementary or alternative to the goal of environmental preservation. In reality, the reasons for why companies improve their environmental performance are complex. They may choose to follow their ethical values or implement policies passively under the pressure of the institutional environment or because of social norms. In areas with strong environmental regulations, the formal legal system will force executives to take effective actions to improve corporate environmental performance. In this case, the role of religious culture in improving corporate environmental performance may be weakened. Therefore, we complete a further analysis to investigate the differences between the two types of regulatory environments. The Urban Pollution Regulatory Information Disclosure Index (PITI) is jointly developed by the Institute of Public and Environmental Affairs (IPE) and the Natural Resources Defense Council (NRDC). The index can effectively reflect the institutional constraints represented by the central government’s environmental surveillance, including its supervision by the Ministry of Ecology and Environment. We divided the firms into strongly and weakly regulated groups and conducted regression analyses on each group. The regression results are listed in Table 8. As shown in columns (3) and (4), the regression coefficient of REC is positive and statistically significant only in areas with weak regulation, which indicates that the effect of religious culture on improving corporate environmental performance is stronger in areas with weak regulation. The conclusion from this observation implies that religious culture serves as an important and implicit alternative governance mechanism that compensates for formal institutions when they are inadequate.

The upper echelon theory shows that age, educational background, and other characteristics effectively reflect people’s values and cognitive basis, and these values and cognitive basis will further affect people’s decision-making behavior (Hambrick and Mason, 1984). The spread and penetration of religious culture are a slow process, and it takes time to influence believers. So as CEOs get older, religious culture influences them more. The rich life experiences of older CEOs enable them to have a deeper understanding of “Tian-ren-he-yi” belief system, which makes them more willing to invest in corporate environmental governance. Being well-educated means that CEOs generally have a more complete body of knowledge that can shape better values and guide them to fulfill their corporate social responsibility in a more active way (Slater and Dixon-Fowler, 2010). And environmental protection is part of corporate social responsibility. Therefore, we believe that well-educated CEOs will spontaneously improve corporate environmental performance. That is, the educational background will weaken the role of religious culture in improving corporate environmental performance. We complete a further analysis to investigate how the different ages and education work in the relationship between religious culture and corporate environmental performance. We divided the firms into old age, Young age, Poor-educated, and well-educated four groups, and conducted regression analyses on each group. The regression results are listed in Table 9. As shown in columns (1) and (2), the regression coefficient of REC is positive and statistically significant only in the group with old ages, which indicates that the effect of religious culture on improving corporate environmental performance is stronger when the CEO with old age. As shown in columns (3) and (4), the regression coefficient of REC is significantly positive only in the group with poor-educated. It indicates that the educational background will weaken the role of religious culture in improving corporate environmental performance.