The Economic Impact of Environmentally Responsible Practices

Abstract

The objective of this paper is to present a dynamic analysis of the relationship between environmental (EP) and financial performance (FP). More precisely, we have analysed this relationship by considering the measurement of EP lagged by one, two, and three periods. The introduction of lagged variables at both an aggregate and non-aggregate level, aims to capture the effects of EP on FP over time. Our results show that the aggregate measure of the lagged EP has a persistent positive effect on FP, extended over three years. This effect appears to be more marked for large size companies, for companies with low risk levels and for those spending less on investment. Results for non-aggregate measurements reveal an asymmetric relationship between FP and KLD's concerns score, of which the impact is negative and persistent, and between FP and KLD's strengths score, where the effect is positive and limited to one year.

The Impact of Indirect Corporate Social Performance Signals on Firm Value: Evidence from an Event Study

“…() examined the impact of employee‐related and community‐related SR on firms' financial performance, and Tebini et al . () explored the impact of environmental‐related SR practices.…”

“…Recently, studies have started to examine CSP using more narrowly defined social domains (Awaysheh and Klassen, 2010;Jones et al, 2014;Kumar et al, 2016;Michelon et al, 2013). For instance, Lawal et al (2017) examined the impact of employee-related and community-related SR on firms' financial performance, and Tebini et al (2016) explored the impact of environmental-related SR practices.…”

Does Specific CSR Training for Managers Impact Shareholder Value? Implications for Education in Sustainable Development

“…There is a stream of research demonstrating the positive impact of CSR on the efficiency of internal organizational processes such as worker motivation and productivity (Siltaoja, 2006;Rettab et al, 2006;Stuebs & Sun, 2010;Barrena-Martínez et al, 2015) environmentally friendly and technically more efficient production systems (Mueller et al, 2009;Orlitzky et al, 2011) or getting better financing terms (Doh et al, 2010;Torres et al, 2012). All this has an impact on a company's business outcomes, hence, on its financial value (Martín de Castro et al, 2016;Tebini et al, 2016).…”

Market reactions to environmental policies: Evidence from China

“…Over the last couple of decades, many researchers have explored how corporate social responsibility (CSR) and environmentally responsible practices affect firm economic performance, with much focus on quantitative method (Ducassy, 2013;Martín-de Castro et al, 2016;Pätäri et al, 2012;Schons & Steinmeier, 2016;Tebini et al, 2016;Wagner et al, 2002). However, prior literature provides inconclusive empirical evidence.…”

“…For example, based on a US sample, Matsumura, Prakash, and Vera-Mu oz (2014) indicate that the markets penalize firms with higher carbon emissions, but a further penalty is imposed on firms that do not disclose emission information. Iwata & Okada, 2011;Lee, Min, & Yook, 2015;Martín-de Castro et al, 2016;Tebini et al, 2016;Wagner et al, 2002), Korea (Alvarez, 2012), the UK (Baboukardos, 2017) and so on. Other researchers examine the research question in the context of the European Union (Clarkson, Li, Pinnuck, & Richardson, 2015;Oestreich & Tsiakas, 2015), Japan (e.g.…”