Title: Impact of market incentive-based environmental regulations on corporate financial performance in a circular economy

Authors: Linhui Yang

Addresses: Accounting College, Shanxi Finance & Taxation College, Taiyuan, 030024, China

Abstract: In the Chinese capital market, environmental regulations based on market incentives will have a significant impact on the economic activities of enterprises. To understand the impact of market incentive based environmental regulations on corporate financial performance, this study proposes a financial performance calculation model based on an improved long short-term memory network to evaluate corporate financial performance. On the basis of making assumptions, impact analysis is conducted through regression analysis and other methods. The experimental results indicate that the difference between output and expected financial performance is only 0.023. Technological innovation (TI) was significantly negatively correlated with market-based environmental regulation (p < 0.05), and significantly positively correlated with corporate financial performance (p < 0.01). The research method can effectively analyse the impact of environmental regulations on corporate financial performance based on market incentives. Most existing research analyses national or regional data, with less emphasis on the perspective of individual enterprises.

Keywords: circular economy; market incentives; environmental regulation; financial performance; FP; LSTM.

DOI: 10.1504/IJCIS.2025.149111

International Journal of Critical Infrastructures, 2025 Vol.21 No.5, pp.515 - 531

Received: 28 Jul 2023
Accepted: 27 Dec 2023
Published online: 14 Oct 2025 *

Full-text access for editors Full-text access for subscribers Purchase this article Comment on this article