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Does corporate environmentalism affect corporate insolvency risk? The role of market power and competitive intensity

Author

Listed:
  • Saqib Aziz

    (ESC [Rennes] - ESC Rennes School of Business)

  • Mahabubur Rahman

    (ESC [Rennes] - ESC Rennes School of Business)

  • Dildar Hussain

    (ESC [Rennes] - ESC Rennes School of Business)

  • Duc Nguyen

    (IPAG Business School, VNU - Vietnam National University [Hanoï])

Abstract

Little is known about the effects of green performance on corporate insolvency risk. This study examines the relationship between green performance and firm insolvency risk from both theoretical and empirical perspectives. Using a panel of 179 US firms included in the Newsweek Green Rankings and a system generalised method of moments estimation which generates endogeneity-robust regression coefficients, we found that firms with higher green performance are at lower risk of insolvency. We further postulate and provide theory-based empirical evidence that the nexus between green performance and insolvency risk is contingent upon other internal and external boundary conditions. Specifically, this research documents that the nexus between green performance and firm insolvency risk is moderated by market power as well as industry competitive intensity. The results of this study are robust across several sensitivity analyses.

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  • Saqib Aziz & Mahabubur Rahman & Dildar Hussain & Duc Nguyen, 2021. "Does corporate environmentalism affect corporate insolvency risk? The role of market power and competitive intensity," Post-Print hal-03344206, HAL.
    • Handle: RePEc:hal:journl:hal-03344206
    DOI: 10.1016/j.ecolecon.2021.107182
    Note: View the original document on HAL open archive server: https://rennes-sb.hal.science/hal-03344206
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    References listed on IDEAS

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    2. Meles, Antonio & Salerno, Dario & Sampagnaro, Gabriele & Verdoliva, Vincenzo & Zhang, Jianing, 2023. "The influence of green innovation on default risk: Evidence from Europe," International Review of Economics & Finance, Elsevier, vol. 84(C), pages 692-710.
    3. Zhenjie Wang & Jiewei Zhang, 2023. "Nexus between corporate environmental performance and corporate environmental responsibility on innovation performance," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 25(10), pages 11645-11672, October.
    4. Mehmet Civelek & Vladimír Krajèík & Vendula Fialova, 2023. "The impacts of innovative and competitive abilities of SMEs on their different financial risk concerns: System approach," Oeconomia Copernicana, Institute of Economic Research, vol. 14(1), pages 327-354, March.
    5. Liu, Haiyue & Wang, Yile & Shi, Xiaoshuang & Pang, Lina, 2022. "How do environmental policies affect capital market reactions? Evidence from China's construction waste treatment policy," Ecological Economics, Elsevier, vol. 198(C).

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    Keywords

    Green performance; Insolvency risk; Market share; Industry competitiveness; Z-score;
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