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Environmental Concerns in Capital Budgeting: Impact on Firms Performance

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  • Khan, Muhammad Umer

Abstract

Product manufacturing often has negative effects on the environment. Pollution, waste disposal, recycling, insurance, and public relations associated with these effects have become a focus in the 21st century. Within the last two decades, the concern for these environmental effects has grown. Companies and upper management are held financially responsible for negative environmental impacts. This new financial responsibility must be incorporated into the traditional capital budgeting process. To measure the impact of capital budgeting decisions on firm’s performance while incorporating environmental concerns. The research objective of this study is to measure the impact of capital budgeting decisions on firm’s performance and to observe the capital budgeting decisions which are environmentally friendly taken by firms to increase revenues. The research will be based upon a quantitative design. The researcher will examine the behaviour of different environmental decisions through asking questions with the help of survey and document analysis, and will try to find out the basic idea of authorized professionals regarding the impact of environmental policies effecting firms performance. The research strategy for this research is that the surveys will be conducted and document analysis of the firms in the manufacturing sector of Pakistan will be done which includes cement, fertilizers, chemical, and sports industries. In the rapid industrialization era where life is becoming simple and easier for all human beings on the other hand it is suffocating for the Global Climate. The independent variable Environmental Concerns is found to have a direct impact on the performance of the firms as the pressure from Media, Government policies, Investors and employees is forcing the firms to adopt environmentally friendly business activities which is resulting in increased revenue for the firms. Those firms who have not adopted any environmentally friendly business practices, and plan to make any capital budgeting decisions in the future will surely result positively in the form of increased revenues, more customers and successfully achieving the vision of the company.

Suggested Citation

  • Khan, Muhammad Umer, 2016. "Environmental Concerns in Capital Budgeting: Impact on Firms Performance," MPRA Paper 116417, University Library of Munich, Germany, revised 26 Aug 2022.
    • Handle: RePEc:pra:mprapa:116417
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    References listed on IDEAS

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    More about this item

    Keywords

    Capital budgeting; environment;

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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