Market Value and Performance Contingencies of Responsible Production Among Chinese Manufacturers

Manufacturers increasingly practice responsible production to build a corporate reputation with sustainability considerations, but little is known about its performance value. Drawing upon the legitimacy and contingency theories, we examine the market value of responsible production practices adopted by manufacturers and the boundary conditions influencing the performance link. Based on 182 announcements of responsible production practices adopted by publicly listed Chinese manufacturers between 2015 and 2021, this study employs a short-term event study approach to examine the market value of responsible production implementation as well as the moderating effects of resource slack (i.e., financial slack and operational slack) and internal control quality. The event study results indicate that the stock market reacts positively to their announcements of responsible production practices. In addition, financial slack strengthens, but operational slack weakens the market value associated with the manufacturers’ announced responsible production practices. Furthermore, the positive market reaction to the responsible production practices announcements is more prominent for manufacturers with better internal control quality. This is the first study that empirically reveals the performance value of responsible production and the performance contingencies on internal context factors. Managers are advised to monitor financial slack and internal control quality for their responsible production journey.Keywords: responsible production, event study, market value, resource slack, internal control quality