From Smoke to Stock: Effect of PM2.5 on Firm Performance

Motivated by the severity of air pollution, especially with PM 2.5 particles in Thailand, along with the 2030 United Nations' Sustainable Development Goals (UNSDGs), we study the effects of PM2.5 (particulate matter) on firm performance in Thailand over the period of 2014–2022 and find a positive association between PM2.5 and firm performance. Especially, a one standard deviation in the value of PM2.5 increases firm performance by 9.41%. Our findings are consistent with Porter's environmental competitiveness, resource‐based view, and externalities hypotheses predicting a positive association. To address endogeneity concerns, we conduct two‐stage least squares instrumental variables, GMM dynamic panel regression, and system GMM robust estimation. Our findings are robust to endogeneity concerns and provide new insights into the real effects of PM2.5 on firm performance. Corporations can achieve both economic performance and sustainability when they turn environmental challenges into opportunities by leveraging innovation and policy incentives to enhance market valuation, offering actionable insights for standard setters, policymakers, and corporate leaders. As a microlevel economic entity, corporations have a fundamental role to play in reaching the UNSDGs, especially on climate action.