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The impact of environmental performance on firm performance: Short-term costs and long-term benefits?

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  • Horváthová, Eva

Abstract

We examine the intertemporal effect of environmental performance on financial performance and propose a method to assess the environmental performance in a fuller manner based on the weighting various pollutants according to their dangerousness to environment. Using our improved measures of environmental performance applied to the firm level data from the Czech Republic, the results suggest that while the effect of environmental performance on financial performance is negative for environmental performance lagged by 1year lag, it becomes positive for 2years lag. As a consequence, our findings indicate that Porter hypothesis holds in the long-run.

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Bibliographic Info

Article provided by Elsevier in its journal Ecological Economics.

Volume (Year): 84 (2012)
Issue (Month): C ()
Pages: 91-97

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Handle: RePEc:eee:ecolec:v:84:y:2012:i:c:p:91-97

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Web page: http://www.elsevier.com/locate/ecolecon

Related research

Keywords: Environmental performance; Financial performance; Environmental certification; Porter hypothesis;

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References

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  1. Sarkis, Joseph & Cordeiro, James J., 2001. "An empirical evaluation of environmental efficiencies and firm performance: Pollution prevention versus end-of-pipe practice," European Journal of Operational Research, Elsevier, vol. 135(1), pages 102-113, November.
  2. Kjetil Telle, 2006. "“It Pays to be Green” – A Premature Conclusion?," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 35(3), pages 195-220, November.
  3. Eriksson, Tor, 2003. "Managerial Pay and Executive Turnover in the Czech and Slovak Republics," Working Papers 03-3, University of Aarhus, Aarhus School of Business, Department of Economics.
  4. Glen Dowell & Stuart Hart & Bernard Yeung, 2000. "Do Corporate Global Environmental Standards Create or Destroy Market Value?," Management Science, INFORMS, vol. 46(8), pages 1059-1074, August.
  5. Michael E. Porter & Claas van der Linde, 1995. "Toward a New Conception of the Environment-Competitiveness Relationship," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 97-118, Fall.
  6. Horváthová, Eva, 2010. "Does environmental performance affect financial performance? A meta-analysis," Ecological Economics, Elsevier, vol. 70(1), pages 52-59, November.
  7. Karen Palmer & Wallace E. Oates & Paul R. Portney, 1995. "Tightening Environmental Standards: The Benefit-Cost or the No-Cost Paradigm?," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 119-132, Fall.
  8. Freedman, Martin & Jaggi, Bikki, 1994. "Analysis of the association between pollution performance and input cost factors: The case of electric utility plants," Journal of Accounting and Public Policy, Elsevier, vol. 13(1), pages 31-48.
  9. Dylan G. Rassier & Dietrich Earnhart, 2011. "Short‐Run And Long‐Run Implications Of Environmental Regulation On Financial Performance," Contemporary Economic Policy, Western Economic Association International, vol. 29(3), pages 357-373, 07.
  10. Shameek Konar & Mark A. Cohen, 2001. "Does The Market Value Environmental Performance?," The Review of Economics and Statistics, MIT Press, vol. 83(2), pages 281-289, May.
  11. Adam B. Jaffe et al., 1995. "Environmental Regulation and the Competitiveness of U.S. Manufacturing: What Does the Evidence Tell Us?," Journal of Economic Literature, American Economic Association, vol. 33(1), pages 132-163, March.
  12. Elsayed, Khaled & Paton, David, 2005. "The impact of environmental performance on firm performance: static and dynamic panel data evidence," Structural Change and Economic Dynamics, Elsevier, vol. 16(3), pages 395-412, September.
  13. Théophile AZOMAHOU & Phu NGUYEN VAN & Marcus WAGNER, 2001. "Determinants of Environmental and Economic Performance of Firms: An Empirical Analysis of the European Paper Industry," Working Papers of BETA 2001-22, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  14. Greg Filbeck & Raymond Gorman, 2004. "The Relationship between the Environmental and Financial Performance of Public Utilities," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 29(2), pages 137-157, October.
  15. Cormier, Denis & Magnan, Michel & Morard, Bernard, 1993. "The impact of corporate pollution on market valuation: some empirical evidence," Ecological Economics, Elsevier, vol. 8(2), pages 135-155, October.
  16. Al-Tuwaijri, Sulaiman A. & Christensen, Theodore E. & Hughes, K. II, 2004. "The relations among environmental disclosure, environmental performance, and economic performance: a simultaneous equations approach," Accounting, Organizations and Society, Elsevier, vol. 29(5-6), pages 447-471.
  17. Salama, Aly, 2005. "A note on the impact of environmental performance on financial performance," Structural Change and Economic Dynamics, Elsevier, vol. 16(3), pages 413-421, September.
  18. Halkos, George & Sepetis, Anastasios, 2007. "Can capital markets respond to environmental policy of firms? Evidence from Greece," Ecological Economics, Elsevier, vol. 63(2-3), pages 578-587, August.
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