Environmental management system adoption and the operational performance of firm in the textile and apparel industry of China

Abstract

In China, more firms in the textile and apparel industry adopt environmental managementsystems compared to firms that manufacture other products. It is important to know how thefirms' financial and real performances are affected. We study the changes of firms' performancein profitability, sales, and operational efficiency after environmental management system (EMS)adoption using an event study. Based on 22 events of EMS adoption, we found a significant decreasein firms' profitability, sales, and inventory productivity. We explore the reasons which led to thedecrease in firm performances. We found that the increase in sample firms' total assets is themajor reason. The loss in operational efficiency and flexibility are due to the requirements of the EMS.