Economic Impacts of Environmental Violations: Evidence from the BYDs Changsha Factory Pollution Incident

In the post-COVID-19 era, environmental issues have garnered heightened societal attention. This study takes BYDs Changsha factory pollution incident that occurred in May 2022 as an example and analyzes the economic impact of environmental violations on BYD and its impact on long-term strategy based on the Efficient Market Hypothesis and Resource-Based View. It finds that the pollution incident at BYDs Changsha factory triggered negative market sentiment in the short term, causing stock price fluctuations and damage to investor confidence. In the long term, the incident prompted BYD to increase its environmental protection investment, enhancing its ESG performance and sustainable development capabilities. Environmental pollution incidents not only affect a company's reputation and market performance but also remind manufacturing enterprises to take preventive measures in advance, actively respond to crises, and strengthen communication and responsibility with the public. The findings highlight the necessity for firms to integrate environmental stewardship into their strategic and operational decisions. This thesis provides insights for environmental compliance management of similar manufacturing enterprises.