IDEAS home Printed from https://ideas.repec.org/h/spr/sprchp/978-3-031-48457-5_11.html
   My bibliography  Save this book chapter

The Effect of Environmental Scores on Financial Performance of Energy Companies in the European Region

In: The ESG Framework and the Energy Industry

Author

Listed:
  • Gizem Arı

    (Hacettepe University)

  • Z. Göknur Büyükkara

    (Hacettepe University)

Abstract

Increasing awareness and expectations for a sustainable environment increases the pressure on the energy industry to reduce its pollution. Despite the importance of the subject, the number of studies examining the effect of environmental responsibility activities on financial performance of companies operating in the energy sector is limited. Also, the findings obtained from previous studies are mixed about the direction of the relevant relationship. This study examines the impact of environmental responsibility on financial performance within the framework of companies operating in the energy sector in the European Region. In doing so, it probes the validity of the stakeholder theory and agency theory in explaining the relationship between corporate social-environmental responsibility and financial performance. We consider 58 European energy companies that have detailed and classified environmental responsibility scores between 2011 and 2020. According to the applied three-dimensional panel data regression results, we find that the aggregate environmental score of the European energy companies has not a significant effect on their financial performance. However, the resource use score, which is one of the environmental sub-scores, is negatively related to both the return on assets and return on equity of the companies. Moreover, the emission reduction and environmental innovation scores, which are the other environmental sub-scores, do not have a significant effect on the environmental-financial performance relationship. Although we have obtained findings showing that activities aimed at reducing the use of environmentally harmful resources, energy and water have a reducing effect on financial performance by shedding light on the validity of the agency theory, we see that a neutral effect is dominant between the environmental responsibility activities and financial performance carried out in European energy companies in general.

Suggested Citation

  • Gizem Arı & Z. Göknur Büyükkara, 2024. "The Effect of Environmental Scores on Financial Performance of Energy Companies in the European Region," Springer Books, in: James Thewissen & Özgür Arslan-Ayaydin & Wim Westerman & André Dorsman (ed.), The ESG Framework and the Energy Industry, pages 209-239, Springer.
    • Handle: RePEc:spr:sprchp:978-3-031-48457-5_11
    DOI: 10.1007/978-3-031-48457-5_11
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:sprchp:978-3-031-48457-5_11. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.