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The relationship between multi-dimensional environmental performance and corporate financial performance: an investigation of UK companies

The relationship between multi-dimensional environmental performance and corporate financial performance: an investigation of UK companies
The relationship between multi-dimensional environmental performance and corporate financial performance: an investigation of UK companies
With a new climate change agreement signed by 200 countries at the Paris Summit in December 2015, it has become more important for both governments and companies to understand the impact of companies’ environmental performance. For the past decades, scholars have shown great interest in how the corporate environmental performance influences the corporates’ financial performance. However, the results are contradictory and there is a lack of agreement on the theoretical framework. This study investigates the impact of multi-dimensional corporate environmental performance on the corporate financial performance by taking consideration of both environmental management and operation performance. We use a sample of carbon-intensive firms in the UK with their carbon emissions disclosed from 2005 to 2012, and find a positive influence of the companies’ environmental operational performance – carbon emission performance - on their financial
performance. Our results indicate that while the effect on financial performance is linear for environmental operational performance on the same year and with one year lag, it becomes U-shape for 2-year lag. The results also suggest that corporate environmental management performance has significantly negative impact on the financial performance. When considering the interaction between environmental management and the carbon performance, we then find that corporate environmental management performance has a weak moderation effect on the relationship between environmental operational performance and financial performance. The overall picture of the results suggests that environmental management generates costs for the firms and jeopardises the financial performance, while better environmental operational performance would help the firms to achieve better performance financially, hence engaging in environmental initiatives benefits firms’ financial performance in the long term.
Xue, Bai
975f8125-7cf4-42b2-87fe-e5cb5a4da2e1
Zhang, Zhuang
df7b9fa8-04fd-4085-b74d-c9c1506b974e
Li, Pingli
a7bf0454-129f-46fa-bdf3-5bd940f569c4
Xue, Bai
975f8125-7cf4-42b2-87fe-e5cb5a4da2e1
Zhang, Zhuang
df7b9fa8-04fd-4085-b74d-c9c1506b974e
Li, Pingli
a7bf0454-129f-46fa-bdf3-5bd940f569c4

Xue, Bai, Zhang, Zhuang and Li, Pingli (2016) The relationship between multi-dimensional environmental performance and corporate financial performance: an investigation of UK companies. International GARI Conference: The Globalization of Corporate Governance: Does Compliance Kill Values and Enterprise?, , Henley-on-Thames, United Kingdom. 18 - 20 Apr 2016.

Record type: Conference or Workshop Item (Paper)

Abstract

With a new climate change agreement signed by 200 countries at the Paris Summit in December 2015, it has become more important for both governments and companies to understand the impact of companies’ environmental performance. For the past decades, scholars have shown great interest in how the corporate environmental performance influences the corporates’ financial performance. However, the results are contradictory and there is a lack of agreement on the theoretical framework. This study investigates the impact of multi-dimensional corporate environmental performance on the corporate financial performance by taking consideration of both environmental management and operation performance. We use a sample of carbon-intensive firms in the UK with their carbon emissions disclosed from 2005 to 2012, and find a positive influence of the companies’ environmental operational performance – carbon emission performance - on their financial
performance. Our results indicate that while the effect on financial performance is linear for environmental operational performance on the same year and with one year lag, it becomes U-shape for 2-year lag. The results also suggest that corporate environmental management performance has significantly negative impact on the financial performance. When considering the interaction between environmental management and the carbon performance, we then find that corporate environmental management performance has a weak moderation effect on the relationship between environmental operational performance and financial performance. The overall picture of the results suggests that environmental management generates costs for the firms and jeopardises the financial performance, while better environmental operational performance would help the firms to achieve better performance financially, hence engaging in environmental initiatives benefits firms’ financial performance in the long term.

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More information

Accepted/In Press date: 31 March 2016
e-pub ahead of print date: 18 April 2016
Published date: 18 April 2016
Venue - Dates: International GARI Conference: The Globalization of Corporate Governance: Does Compliance Kill Values and Enterprise?, , Henley-on-Thames, United Kingdom, 2016-04-18 - 2016-04-20
Organisations: Centre of Excellence for International Banking, Finance & Accounting

Identifiers

Local EPrints ID: 405675
URI: http://eprints.soton.ac.uk/id/eprint/405675
PURE UUID: 4f6cd226-1b86-468e-a572-031f9cb9c5c9
ORCID for Bai Xue: ORCID iD orcid.org/0000-0001-8792-2021
ORCID for Zhuang Zhang: ORCID iD orcid.org/0000-0001-5369-3144
ORCID for Pingli Li: ORCID iD orcid.org/0000-0001-5020-9126

Catalogue record

Date deposited: 18 Feb 2017 00:22
Last modified: 12 Dec 2021 06:45

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Contributors

Author: Bai Xue ORCID iD
Author: Zhuang Zhang ORCID iD
Author: Pingli Li ORCID iD

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