IDEAS home Printed from https://ideas.repec.org/a/eco/journ2/2015-02-06.html
   My bibliography  Save this article

Nexus between Profitability and Environmental Performance of Indian Firms: An Analysis with Granger Causality

Author

Listed:
  • Vinayagamoorthi Vasanth

    (Department of Commerce and Financial Studies, Bharathidasan University, Tiruchirappalli, Tamil Nadu, India,)

  • Murugesan Selvam

    (Department of Commerce and Financial Studies, Bharathidasan University, Tiruchirappalli, Tamil Nadu, India,)

  • Kasilingam Lingaraja

    (Department of Commerce and Financial Studies, Bharathidasan University, Tiruchirappalli, Tamil Nadu, India,)

  • Ramachandran Rajesh Ramkumar

    (Department of Business Administration, Bharathidasan University Model College, Vedaranyam, Nagapattinam Tamil Nadu, India.)

Abstract

Sustainable development enhances the human life, with good eco facilities. The way to move toward the sustainable development is by giving best solutions to the issues of unbalanced ecological, environmental and economic development. This paper investigates the relationship between the environmental performance and the profitability variables such as return on assets (ROA), return on equity (ROE), return on capital employed (ROCE), and return on sales (ROS) of the sample firms in India. Granger causality test was used to examine bidirectional causality running from energy intensity (EI) to profitability of the firm. The study identified causal relationship that existed among the environmental performance and profitability of the firm. Further, it is found that there was an inverse relationship between ROCE and EI of the firm while direct relationship existed among ROA, ROE, ROS and EI. It is suggested that the practitioners, policy makers etc. may adopt the environment friendly technologies and encourage the Indian firms to use more energy efficient technology.

Suggested Citation

  • Vinayagamoorthi Vasanth & Murugesan Selvam & Kasilingam Lingaraja & Ramachandran Rajesh Ramkumar, 2015. "Nexus between Profitability and Environmental Performance of Indian Firms: An Analysis with Granger Causality," International Journal of Energy Economics and Policy, Econjournals, vol. 5(2), pages 433-439.
    • Handle: RePEc:eco:journ2:2015-02-06
    as

    Download full text from publisher

    File URL: http://www.econjournals.com/index.php/ijeep/article/download/1091/648
    Download Restriction: no
    File URL: http://www.econjournals.com/index.php/ijeep/article/view/1091/648
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Barker, Terry & Ekins, Paul & Foxon, Tim, 2007. "Macroeconomic effects of efficiency policies for energy-intensive industries: The case of the UK Climate Change Agreements, 2000-2010," Energy Economics, Elsevier, vol. 29(4), pages 760-778, July.
    2. J. Daniel Khazzoom, 1987. "Energy Saving Resulting from the Adoption of More Efficient Appliances," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 85-89.
    3. Cohen, Claude & Lenzen, Manfred & Schaeffer, Roberto, 2005. "Energy requirements of households in Brazil," Energy Policy, Elsevier, vol. 33(4), pages 555-562, March.
    4. Pedro Linares & Xavier Labandeira, 2010. "Energy Efficiency: Economics And Policy," Journal of Economic Surveys, Wiley Blackwell, vol. 24(3), pages 573-592, July.
    5. Freire-González, Jaume, 2011. "Methods to empirically estimate direct and indirect rebound effect of energy-saving technological changes in households," Ecological Modelling, Elsevier, vol. 223(1), pages 32-40.
    6. Hanley, Nick D. & McGregor, Peter G. & Swales, J. Kim & Turner, Karen, 2006. "The impact of a stimulus to energy efficiency on the economy and the environment: A regional computable general equilibrium analysis," Renewable Energy, Elsevier, vol. 31(2), pages 161-171.
    7. Kok, Rixt & Benders, Rene M.J. & Moll, Henri C., 2006. "Measuring the environmental load of household consumption using some methods based on input-output energy analysis: A comparison of methods and a discussion of results," Energy Policy, Elsevier, vol. 34(17), pages 2744-2761, November.
    8. Train, Kenneth E. & Davis, William B. & Levine, Mark D., 1997. "Fees and rebates on new vehicles: Impacts on fuel efficiency, carbon dioxide emissions, and consumer surplus," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 33(1), pages 1-13, March.
    9. Anthony Halog & Yosef Manik, 2011. "Advancing Integrated Systems Modelling Framework for Life Cycle Sustainability Assessment," Sustainability, MDPI, vol. 3(2), pages 1-31, February.
    10. Koji Takase & Yasushi Kondo & Ayu Washizu, 2005. "An Analysis of Sustainable Consumption by the Waste Input‐Output Model," Journal of Industrial Ecology, Yale University, vol. 9(1‐2), pages 201-219, January.
    11. A. Greening, Lorna & Greene, David L. & Difiglio, Carmen, 2000. "Energy efficiency and consumption -- the rebound effect -- a survey," Energy Policy, Elsevier, vol. 28(6-7), pages 389-401, June.
    12. Ouyang, Jinlong & Long, Enshen & Hokao, Kazunori, 2010. "Rebound effect in Chinese household energy efficiency and solution for mitigating it," Energy, Elsevier, vol. 35(12), pages 5269-5276.
    13. Ivonne Acosta-Alba & Hayo M. G. Van der Werf, 2011. "The Use of Reference Values in Indicator-Based Methods for the Environmental Assessment of Agricultural Systems," Sustainability, MDPI, vol. 3(2), pages 1-19, February.
    14. Herendeen, Robert & Tanaka, Jerry, 1976. "Energy cost of living," Energy, Elsevier, vol. 1(2), pages 165-178.
    15. J. Daniel Khazzoom, 1980. "Economic Implications of Mandated Efficiency in Standards for Household Appliances," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 21-40.
    16. Chapman, P. F., 1974. "1. Energy costs: a review of methods," Energy Policy, Elsevier, vol. 2(2), pages 91-103, June.
    17. J. Daniel Khazzoom, 1989. "Energy Savings from More Efficient Appliances: A Rejoinder," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 157-166.
    18. Matthias Finkbeiner & Erwin M. Schau & Annekatrin Lehmann & Marzia Traverso, 2010. "Towards Life Cycle Sustainability Assessment," Sustainability, MDPI, vol. 2(10), pages 1-14, October.
    19. Jalas, Mikko, 2002. "A time use perspective on the materials intensity of consumption," Ecological Economics, Elsevier, vol. 41(1), pages 109-123, April.
    20. Dimitropoulos, John, 2007. "Energy productivity improvements and the rebound effect: An overview of the state of knowledge," Energy Policy, Elsevier, vol. 35(12), pages 6354-6363, December.
    21. Brookes, L. G., 1978. "Energy policy, the energy price fallacy and the role of nuclear energy in the UK," Energy Policy, Elsevier, vol. 6(2), pages 94-106, June.
    22. Dufournaud, Christian M. & Quinn, John T. & Harrington, Joseph J., 1994. "An Applied General Equilibrium (AGE) analysis of a policy designed to reduce the household consumption of wood in the Sudan," Resource and Energy Economics, Elsevier, vol. 16(1), pages 67-90, March.
    23. Amartya K. Sen, 1967. "Isolation, Assurance and the Social Rate of Discount," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 81(1), pages 112-124.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. María Consuelo Pucheta‐Martínez & Blanca López‐Zamora, 2018. "Engagement of directors representing institutional investors on environmental disclosure," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 25(6), pages 1108-1120, November.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jaume Freire-Gonz lez & Ignasi Puig-Ventosa, 2015. "Energy Efficiency Policies and the Jevons Paradox," International Journal of Energy Economics and Policy, Econjournals, vol. 5(1), pages 69-79.
    2. Freire-González, Jaume, 2011. "Methods to empirically estimate direct and indirect rebound effect of energy-saving technological changes in households," Ecological Modelling, Elsevier, vol. 223(1), pages 32-40.
    3. Freire-González, Jaume & Font Vivanco, David & Puig-Ventosa, Ignasi, 2017. "Economic structure and energy savings from energy efficiency in households," Ecological Economics, Elsevier, vol. 131(C), pages 12-20.
    4. David Font Vivanco & Jaume Freire‐González & Ray Galvin & Tilman Santarius & Hans Jakob Walnum & Tamar Makov & Serenella Sala, 2022. "Rebound effect and sustainability science: A review," Journal of Industrial Ecology, Yale University, vol. 26(4), pages 1543-1563, August.
    5. Freire-González, Jaume, 2017. "Evidence of direct and indirect rebound effect in households in EU-27 countries," Energy Policy, Elsevier, vol. 102(C), pages 270-276.
    6. Karen Turner, 2013. ""Rebound" Effects from Increased Energy Efficiency: A Time to Pause and Reflect," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
    7. Wen, Fenghua & Ye, Zhengke & Yang, Huaidong & Li, Ke, 2018. "Exploring the rebound effect from the perspective of household: An analysis of China's provincial level," Energy Economics, Elsevier, vol. 75(C), pages 345-356.
    8. Davood, Manzoor & Mohammad, Aghababaei & Haqiqi, Iman, 2011. "Rebound Effects Analysis of Electricity Efficiency Improvements in Iran: A Computable General Equilibrium Approach," MPRA Paper 95810, University Library of Munich, Germany.
    9. Lecca, Patrizio & Swales, Kim & Turner, Karen, 2011. "Rebound Effects from Increased Efficiency in the Use of Energy by UK Households," SIRE Discussion Papers 2011-34, Scottish Institute for Research in Economics (SIRE).
    10. Tugba Somuncu & Christopher Hannum, 2018. "The Rebound Effect of Energy Efficiency Policy in the Presence of Energy Theft," Energies, MDPI, vol. 11(12), pages 1-28, December.
    11. Sondes Kahouli & Xavier Pautrel, 2020. "Residential and Industrial Energy Efficiency Improvement: A Dynamic General Equilibrium Analysis of the Rebound Effect," Working Papers 2020.28, Fondazione Eni Enrico Mattei.
    12. Gioele Figus & Patrizio Lecca & Karen Turner & Peter McGregor, 2016. "Increased energy efficiency in Scottish households: trading-off economic benefits and energy rebound effects?," EcoMod2016 9454, EcoMod.
    13. Lecca, Patrizio & McGregor, Peter G. & Swales, J. Kim & Turner, Karen, 2014. "The added value from a general equilibrium analysis of increased efficiency in household energy use," Ecological Economics, Elsevier, vol. 100(C), pages 51-62.
    14. Milin Lu & Zhaohua Wang, 2017. "Rebound effects for residential electricity use in urban China: an aggregation analysis based E-I-O and scenario simulation," Annals of Operations Research, Springer, vol. 255(1), pages 525-546, August.
    15. Saunders, Harry D., 2008. "Fuel conserving (and using) production functions," Energy Economics, Elsevier, vol. 30(5), pages 2184-2235, September.
    16. Kahouli, Sondes & Pautrel, Xavier, 2020. "Residential and Industrial Energy Efficiency Improvement: A Dynamic General Equilibrium Analysis of the Rebound Effect," FEP: Future Energy Program 308024, Fondazione Eni Enrico Mattei (FEEM) > FEP: Future Energy Program.
    17. David Font Vivanco & Serenella Sala & Will McDowall, 2018. "Roadmap to Rebound: How to Address Rebound Effects from Resource Efficiency Policy," Sustainability, MDPI, vol. 10(6), pages 1-17, June.
    18. Zhang, Jiangshan & Lin Lawell, C.-Y. Cynthia, 2017. "The macroeconomic rebound effect in China," Energy Economics, Elsevier, vol. 67(C), pages 202-212.
    19. Toroghi, Shahaboddin H. & Oliver, Matthew E., 2019. "Framework for estimation of the direct rebound effect for residential photovoltaic systems," Applied Energy, Elsevier, vol. 251(C), pages 1-1.
    20. Broberg, Thomas & Berg, Charlotte & Samakovlis, Eva, 2015. "The economy-wide rebound effect from improved energy efficiency in Swedish industries–A general equilibrium analysis," Energy Policy, Elsevier, vol. 83(C), pages 26-37.

    More about this item

    Keywords

    Environmental Performance; Firms Profitability; Energy Intensity; Causal Effect;
    All these keywords.

    JEL classification:

    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eco:journ2:2015-02-06. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ilhan Ozturk (email available below). General contact details of provider: http://www.econjournals.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.