Environmental policy and firm financial performance

European Environment, 2002

This paper reviews empirical studies on the relationship between environmental and economic performance carried out with European data in order to derive conclusions with regard to their methodological comparability. Two types of research are analysed, namely (model) portfolio studies and multiple-regression-based studies. For each type two representative empirical studies are contrasted in order to establish methodological influences, as well as the importance of data availability. The review allows us to formulate a set of criteria to support improved research design in the future. These point to a strong need to

What do we know about the impact of environmental regulations/performance on firm performance? After more than three decades of theoretical as well as empirical research, the results seem to remain inconclusive. Some papers suggest that regulations harm firms, while others claim that regulations may contribute positively and give an impetus to innovations. Therefore, I examine the heterogeneity in financialenvironmental performance nexus, empirically carrying out a meta-regression analysis of 64 outcomes from 37 empirical studies to uncover the underlying factors, which can influence the observed variation in the empirical results. The results suggest both that the empirical method used matters for the nexus and that the likelihood of finding a negative link between environmental and financial performance significantly increases when using simple correlation coefficients instead of more advanced econometric analysis. The results also indicate that the portfolio studies tend to report a negative link between environmental and financial performance. This likely reflects the omitted factors in portfolio studies. The positive link is found more frequently in common law countries than in civil law countries. The results also point to the importance of appropriate time coverage to establish a positive link between environmental and financial performance.

Central European Business Review, 2021

More attention is being paid to companies' environmental performance these days. It includes the consideration of how a company's business operations affect the natural environment in which it operates. In order to improve its environmental performance, various investments are essential. However, one important question is how such environmental performance investments affect the company's financial performance. The theoretical background indicates that both positive and negative effects on financial performance are possible; however, previous results show that environmental performance has a predominantly positive effect on financial performance. Considering the importance of environmental performance, the aim of this research is to determine if there is a positive relationship between environmental performance investments and financial performance. Investments in new longterm assets are used as a proxy for environmental performance investments since newer long-term assets are considered to be more environmentally acceptable than the older ones, while financial performance is measured with the business result (net profit or loss). The data was analysed by using multivariate regression analysis. The sample included 150 Croatian large-sized companies. The results reveal that there is a positive relationship between environmental performance investments and financial performance. Therefore, such investments are of interest to both the environment and the company since they help to preserve the natural environment and, at the same time, improve the company's financial performance. Implications for Central European audience: The effect of environmental performance investments on financial performance has been tested on a sample comprising companies from Central European country, Croatia. Obtained results can be of interests also for audience from other Central European countries with similar characteristics as Croatia due to common historical features (transitional experience).

Ecological Economics, 2010

What do we know about the impact of environmental regulations/performance on firm performance? After more than three decades of theoretical as well as empirical research, the results seem to remain inconclusive. Some papers suggest that regulations harm firms, while others claim that regulations may contribute positively and give an impetus to innovations. Therefore, I examine the heterogeneity in financialenvironmental performance nexus, empirically carrying out a meta-regression analysis of 64 outcomes from 37 empirical studies to uncover the underlying factors, which can influence the observed variation in the empirical results. The results suggest both that the empirical method used matters for the nexus and that the likelihood of finding a negative link between environmental and financial performance significantly increases when using simple correlation coefficients instead of more advanced econometric analysis. The results also indicate that the portfolio studies tend to report a negative link between environmental and financial performance. This likely reflects the omitted factors in portfolio studies. The positive link is found more frequently in common law countries than in civil law countries. The results also point to the importance of appropriate time coverage to establish a positive link between environmental and financial performance.

2016

In recent years, the number of firms that give importance to environmental problems such as consumption of natural resources, decline in water resources and global warming are increasing. However, the classical view of literature argues that firms' environmental protection operations decrease the financial performance of them. For that reason, in this study, it is aimed to analyze the relationship between financial performance and environmental performance of the firms. The sample of the study consists of firms listed on Borsa Istanbul 100 index and has a climate change score declared in CDP Turkey Climate Change Report 2015. Climate change score is used for measuring environmental performance. Accounting (Return on Asset) and marketing measures (Market Value/Book Value) are used for measuring financial performance. The relationship between the environmental performance and financial performance of the firms compared with the help of correlation analysis. Findings reveal that there is a positive relation between financial performance and environmental performance. The correlation between market performance and environmental performance is weaker than the correlation between accounting performance and environmental performance. Moreover, multidimensional scaling technique is utilized to cluster the firms in terms of their financial and environmental performance. A map is formed with the help of multidimensional scaling that shows the relative positioning of the sampled firms due to their environmental performance and financial performance.

2001

The special issue on Corporate Social Responsibility Papers: The potential to contribute to the implementation and integration of EU strategies (CORE) collects a selection of papers presented at the Marie Curie Conference CORE organised by FEEM. The CORE conferences Series addresses the question of the goals achievement of the EU strategies. The main EU strategies (Lisbon, Sustainability, Integration) can be successful if their implementation involves adequately and effectively the business sector, non-profit partnerships and networks, local communities and civil society. In this setting CSR holds the potential to stimulate corporate contributions to the implementation and integration of the mentioned EU strategies and can be tested as a policy tool.

Sustainability, 2017

The relationship between corporate environmental performance and corporate financial performance has been extensively studied in developed countries, and has received less attention in developing countries. For this reason, the main objective of this paper is to examine the effect of corporate environmental performance on corporate financial performance during a global financial crisis, depending on the economic development level of the country where a firm is located. To this end, we obtain data for a sample of 2982 large firms from 2008 to 2015. We apply Petersen's approach to these data, adjusting the standard errors for clustering by both firm and year. The results obtained show that the adoption of environmental practices significantly and positively affects the corporate financial performance in developed and developing countries. However, this effect is stronger for firms located in developing countries than those located in developed countries.

Procedia Economics and Finance, 2014

This paper analyzes the existence of a connection among corporate environmental performance and financial position and performance of a company in developing countries such as Romania. This paper mainly aims at assessing if obtaining environmental performance influences the costs, the revenues and the profitability of a company. Does better environmental performance increase the profitability or the rates of return of the company? Does better environmental performance determine the growth of revenues or the decrease of costs? In order to respond to the above questions we used a panel of Romanian economic entities for a time period of 6 years starting from 2005 until 2010. The results show we can't establish a significant link between the two dimensions studied. The result of the study is confirmed by the literature review, which revealed that in developing countries were not demonstrated significant links between studied indicators unlike mature economies where was evidenced a positive or a negative correlation.

Abstract: Companies that are listed on a stock exchange should know that reporting only financial measures is not enough for ensuring sustainable development. To be truly competitive, they should also include information about environmental policies and about the benefits that the company offers to its employees. The present research aims to provide information on how Romanian listed companies report environmental and social indicators and whether or not this has an impact on financial performance. We used a four time period panel fixed effect model for Romanian companies that are listed in the first category of the Bucharest Stock of Exchange. The results point out that increasing water, air and soil protection has a negative impact on current return on equity, while no effects were detected on return on assets and stock market returns. Other environmental variables such as gas, energy or sound were found not to be statistically significant. Training and benefits after retirement have a mixed effect on financial measures. The research correlates Romanian accounting regulation changes with companies’ characteristics and the influence of financial audit on financial performance, and concludes that increasing environmental and social protection could have an impact on financial performance in the long run, as positive correlation was detected between social or environmental performance and stock market returns one year after the changes occurred. (This article belongs to the Special Issue Sustainable Development and Entrepreneurship in Contemporary Economies)