The Influence of Firms’ Pragmatic Legitimacy on Investors’ Perceptions of Their Environmental Protection Activities

This study demonstrates the mechanisms by which the pragmatic characteristics of legitimacy influence the promotion of corporate social responsibility activities, focusing on firms and investors. We hypothesize that the more aggressive a firm is in its environmental protection efforts, the higher the reduction in investment risk from its environmental performance. Multiple regression analysis was performed for Japanese chemical-related industries from 2017 to 2019. The results revealed that firms that balance environmental performance with business profits should invest in environmental protection activities and improve their environmental performance without touting profitability. The findings reveal the need to incorporate a profitability perspective when considering the relationship between environmental protection activities and investor perceptions.