How does environmental performance affect financial performance? Evidence from Japanese manufacturing firms
AbstractThis paper examines the effects of environmental performance on financial performance using the data of Japanese manufacturing firms from 2004 to 2008. As the environmental performance, our study considers the two different environmental issues of waste and greenhouse gas emissions in capturing the effects of corporate environmental management on financial performance. In addition, to clarify how each financial performance responds to a firm’s effort in dealing with different environmental issues, we utilize many financial performance indices reflecting various market evaluations. Our estimation results show the different effects of each environmental performance on financial performances. For example, while an increase in waste emissions generally improves financial performance, their reduction ameliorates financial performance in dirty industries. In addition, while greenhouse gas reduction leads to an increase in return on equity, it does not have a significant effect on return on sales which reflects the evaluation in the goods market, and it leads to a decrease in the natural logarithm of Tobin’s q, which indicates the value of intangible assets.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 27721.
Date of creation: 28 Dec 2010
Date of revision:
Environmental Performance; Financial Performance; Japanese Manufacturing Firms; Waste Emissions; Greenhouse Gas Emissions;
Find related papers by JEL classification:
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
- Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-01-03 (All new papers)
- NEP-ENE-2011-01-03 (Energy Economics)
- NEP-ENV-2011-01-03 (Environmental Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Cole, Matthew A. & Elliott, Robert J.R. & Shimamoto, Kenichi, 2006.
"Globalization, firm-level characteristics and environmental management: A study of Japan,"
Elsevier, vol. 59(3), pages 312-323, September.
- Matthew Cole, Robert Elliott and Kenichi Shimamoto, 2005. "Globalization, Firm-Level Characteristics and Environmental Management: A Study of Japan," Discussion Papers 05-17, Department of Economics, University of Birmingham.
- 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.
- Yamaguchi, Keiko, 2008. "Reexamination of stock price reaction to environmental performance: A GARCH application," Ecological Economics, Elsevier, vol. 68(1-2), pages 345-352, December.
- Esther Blanco & Javier Rey-Maquieira & Javier Lozano, 2009. "The Economic Impacts Of Voluntary Environmental Performance Of Firms: A Critical Review," Journal of Economic Surveys, Wiley Blackwell, vol. 23(3), pages 462-502, 07.
- Andrew King & Michael Lenox, 2002. "Exploring the Locus of Profitable Pollution Reduction," Management Science, INFORMS, vol. 48(2), pages 289-299, February.
- 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.
- 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.
- Takeda, Fumiko & Tomozawa, Takanori, 2008. "A change in market responses to the environmental management ranking in Japan," Ecological Economics, Elsevier, vol. 67(3), pages 465-472, October.
- Hirsch, Barry T & Seaks, Terry G, 1993. "Functional Form in Regression Models of Tobin's q," The Review of Economics and Statistics, MIT Press, vol. 75(2), pages 381-85, May.
- 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.
- 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.
- Simplice A, Asongu, 2011. "Finance and growth: Schumpeter might be wrong in our era. New evidence from Meta-analysis," MPRA Paper 32559, University Library of Munich, Germany, revised 07 Feb 2013.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If references are entirely missing, you can add them using this form.