Linking Manufacturing Processes With Sustainability: Unpacking the Financial Effects of Green Factory Certification

ABSTRACT This study investigates the impact of green manufacturing strategies on firm performance by shifting the focus from external pressure to strategic legitimacy. Building on legitimacy theory about dual legitimacy support from governmental and market entities, we explain why a firm with green factory certification has a stronger competitive advantage. Using a longitudinal panel data comprising 7612 firm‐year observations from publicly listed Chinese manufacturing firms between 2014 and 2020, we find that green factory certification significantly improves firms' financial performance. This effect is more pronounced for state‐owned firms, whereas it is weaker for firms with low analyst coverage.