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Environmental responsibility, CEO power and financial performance in the energy sector

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  • Siew − Peng Lee

    (Universiti Tunku Abdul Rahman)

Abstract

This paper examines the impact of environmental responsibility on financial performance among firms in the energy sector. In addition, this study also assesses whether CSR and environmental responsibility are more value enhancing for firms with powerful CEOs. The sample consists of 75 firms obtained from the MSCI World Energy index from 2013 to 2017. Two − stage least − squares estimation is applied. The result shows that environmental responsibility practices positively affect a firm’s financial performance. When the three individual dimensions of environmental responsibility are considered, product innovation and resource reduction are positively associated with the firms’ financial performance, but emission reduction is not significant. In addition, this study finds no support for CEO power moderating the relationship between CSR and financial performance, or between environmental responsibility and financial performance. The evidence suggests that in the presence of CEO power, corporate environmental and social activities are not due to agency motives but rather something that is good for the firm and value enhancing, which is consistent with the stakeholder theory of corporate social responsibility.

Suggested Citation

  • Siew − Peng Lee, 2021. "Environmental responsibility, CEO power and financial performance in the energy sector," Review of Managerial Science, Springer, vol. 15(8), pages 2407-2426, November.
    • Handle: RePEc:spr:rvmgts:v:15:y:2021:i:8:d:10.1007_s11846-020-00430-z
    DOI: 10.1007/s11846-020-00430-z
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    Cited by:

    1. Zbysław Dobrowolski & Grzegorz Drozdowski & Mirela Panait & Arkadiusz Babczuk, 2022. "Can the Economic Value Added Be Used as the Universal Financial Metric?," Sustainability, MDPI, vol. 14(5), pages 1-14, March.
    2. Liang, Ting & Zhang, Yue-Jun & Qiang, Wei, 2022. "Does technological innovation benefit energy firms’ environmental performance? The moderating effect of government subsidies and media coverage," Technological Forecasting and Social Change, Elsevier, vol. 180(C).
    3. Jia Meng & ZhongXiang Zhang, 2022. "Corporate Environmental Information Disclosure and Investor Response: Empirical Evidence from China's Capital Market," Working Papers 2022.03, Fondazione Eni Enrico Mattei.
    4. Anna Chwiłkowska-Kubala & Szymon Cyfert & Kamila Malewska & Katarzyna Mierzejewska & Witold Szumowski, 2021. "The Relationships among Social, Environmental, Economic CSR Practices and Digitalization in Polish Energy Companies," Energies, MDPI, vol. 14(22), pages 1-20, November.
    5. Magdalena Kludacz-Alessandri & Małgorzata Cygańska, 2021. "Corporate Social Responsibility and Financial Performance among Energy Sector Companies," Energies, MDPI, vol. 14(19), pages 1-16, September.
    6. Meng, Jia & Zhang, ZhongXiang, 2022. "Corporate environmental information disclosure and investor response: Evidence from China's capital market," Energy Economics, Elsevier, vol. 108(C).
    7. Lan Gao & Liang Wan, 2023. "Does corporate environmental responsibility contribute to financial performance? A dual path analysis through operational efficiency and the cost of debt," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(1), pages 308-323, January.
    8. Bendig, David & Schulz, Colin & Theis, Lukas & Raff, Stefan, 2023. "Digital orientation and environmental performance in times of technological change," Technological Forecasting and Social Change, Elsevier, vol. 188(C).

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    More about this item

    Keywords

    Agency theory; Stakeholder theory; CEO power; Environmental responsibility; Financial performance;
    All these keywords.

    JEL classification:

    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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