Paying or being paid to be green?
Paying or being paid to be green?
This paper proposes a system of simultaneous equations in a panel data setting to examine the relationship between corporate financial performance (FP) and corporate environmental performance (EP) for the group of firms comprising the S&P 500 in- dex. The study separates between brown (heavily polluted) and green (less polluting) sectors. Two main findings emerge from this empirical analysis. First, the impact of environmental performance on financial performance is negative for brown firms and positive for green firms. In contrast, the impact of financial performance on environ- mental performance is positive for brown firms and negative for green firms. Green firms seem to be the winners in this relationship increasing financial performance by reducing investment to be green. Brown firms, on the other hand, need to invest on environmental performance at the expense of financial performance. These results are robust to the presence of sector- and firm-specific fixed effects and alternative estimation methods.
Social Science Research Network
Vashisht, Rupali
9a642de2-5cf5-488d-a32f-34a2686abddf
Calvo-Pardo, Hector
07a586f0-48ec-4049-932e-fb9fc575f59f
Olmo, Jose
706f68c8-f991-4959-8245-6657a591056e
8 February 2023
Vashisht, Rupali
9a642de2-5cf5-488d-a32f-34a2686abddf
Calvo-Pardo, Hector
07a586f0-48ec-4049-932e-fb9fc575f59f
Olmo, Jose
706f68c8-f991-4959-8245-6657a591056e
Vashisht, Rupali, Calvo-Pardo, Hector and Olmo, Jose
(2023)
Paying or being paid to be green?
Social Science Research Network
38pp.
(doi:10.2139/ssrn.4349730).
Record type:
Monograph
(Working Paper)
Abstract
This paper proposes a system of simultaneous equations in a panel data setting to examine the relationship between corporate financial performance (FP) and corporate environmental performance (EP) for the group of firms comprising the S&P 500 in- dex. The study separates between brown (heavily polluted) and green (less polluting) sectors. Two main findings emerge from this empirical analysis. First, the impact of environmental performance on financial performance is negative for brown firms and positive for green firms. In contrast, the impact of financial performance on environ- mental performance is positive for brown firms and negative for green firms. Green firms seem to be the winners in this relationship increasing financial performance by reducing investment to be green. Brown firms, on the other hand, need to invest on environmental performance at the expense of financial performance. These results are robust to the presence of sector- and firm-specific fixed effects and alternative estimation methods.
Text
SSRN-id4349730
- Author's Original
Available under License Other.
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Published date: 8 February 2023
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Local EPrints ID: 475119
URI: http://eprints.soton.ac.uk/id/eprint/475119
PURE UUID: b9a5e826-960a-4dfc-9615-307511513a2e
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Date deposited: 10 Mar 2023 17:35
Last modified: 17 Mar 2024 04:09
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