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Carbon emissions and firm performance: A matter of horizon, materiality and regional specificities

Author

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  • Yann Ferrat

    (CERAG - Centre d'études et de recherches appliquées à la gestion - UGA - Université Grenoble Alpes)

Abstract

The relationship between environmental and financial performance has been a source of great debate. While some scholars have exerted that enhanced environmental performance should generate competitive advantages and thus greater profitability, others have argued that the cost burden would not be offset by corporations. In this study, I reexamined the impact of carbon emission performance (CEP) on corporate financial performance (CFP) by studying the moderating effect of CFP horizon, CEP materiality and regional attributes. Using an international sample of firms between 2015 and 2020, the results suggested that (1) short-term CFP was negatively affected by CEP and (2) solely high materiality firms would derive heightened CFP in the long run. While the former finding was exacerbated for high materiality firms and those operating in regions with more stringent regulations, the latter was driven mainly by North American corporations. Thus, materiality appeared to reconcile diverging expectations of scholars regarding the CEP-CFP relationship. The findings reported in this study were robust to firm-year effects as well as endogeneity issues.

Suggested Citation

  • Yann Ferrat, 2021. "Carbon emissions and firm performance: A matter of horizon, materiality and regional specificities," Post-Print hal-04924060, HAL.
    • Handle: RePEc:hal:journl:hal-04924060
    DOI: 10.1016/j.jclepro.2021.129743
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    Cited by:

    1. Trinh, Vu Quang & Nguyen, Nga & Le, Phuong & Nguyen, Thao Ngoc, 2025. "Unraveling the ‘green-default paradox’: Assessing the influence of gender-diverse boards and socially responsible ratings," International Review of Financial Analysis, Elsevier, vol. 102(C).
    2. Ziqiang Tong & Buxi Li & Lei Yang, 2025. "Digital transformation, carbon performance and financial performance: empirical evidence from the Chinese stock market," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 27(7), pages 17129-17146, July.
    3. Benkraiem, Ramzi & Berrich, Olfa & Lakhal, Nadia & Nizar, Hamza & Lakhal, Faten, 2025. "Balancing ecology and finance: The impact of carbon performance on dividend payout policy," Research in International Business and Finance, Elsevier, vol. 74(C).
    4. Hoang, Khanh & Pham, Linh & Ha, Oanh Kieu & Nghiem, Hoa Xuan, 2025. "Firm-level climate change exposure and firm efficiency," International Review of Economics & Finance, Elsevier, vol. 101(C).

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