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Nexus between Profitability and Environmental Performance of Indian Firms: An Analysis with Granger Causality

Author

Listed:
  • Vinayagamoorthi Vasanth

    (Department of Commerce and Financial Studies, Bharathidasan University, Tiruchirappalli, Tamil Nadu, India,)

  • Murugesan Selvam

    (Department of Commerce and Financial Studies, Bharathidasan University, Tiruchirappalli, Tamil Nadu, India,)

  • Kasilingam Lingaraja

    (Department of Commerce and Financial Studies, Bharathidasan University, Tiruchirappalli, Tamil Nadu, India,)

  • Ramachandran Rajesh Ramkumar

    (Department of Business Administration, Bharathidasan University Model College, Vedaranyam, Nagapattinam Tamil Nadu, India.)

Abstract

Sustainable development enhances the human life, with good eco facilities. The way to move toward the sustainable development is by giving best solutions to the issues of unbalanced ecological, environmental and economic development. This paper investigates the relationship between the environmental performance and the profitability variables such as return on assets (ROA), return on equity (ROE), return on capital employed (ROCE), and return on sales (ROS) of the sample firms in India. Granger causality test was used to examine bidirectional causality running from energy intensity (EI) to profitability of the firm. The study identified causal relationship that existed among the environmental performance and profitability of the firm. Further, it is found that there was an inverse relationship between ROCE and EI of the firm while direct relationship existed among ROA, ROE, ROS and EI. It is suggested that the practitioners, policy makers etc. may adopt the environment friendly technologies and encourage the Indian firms to use more energy efficient technology.

Suggested Citation

  • Vinayagamoorthi Vasanth & Murugesan Selvam & Kasilingam Lingaraja & Ramachandran Rajesh Ramkumar, 2015. "Nexus between Profitability and Environmental Performance of Indian Firms: An Analysis with Granger Causality," International Journal of Energy Economics and Policy, Econjournals, vol. 5(2), pages 433-439.
    • Handle: RePEc:eco:journ2:2015-02-06
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    Cited by:

    1. María Consuelo Pucheta‐Martínez & Blanca López‐Zamora, 2018. "Engagement of directors representing institutional investors on environmental disclosure," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 25(6), pages 1108-1120, November.

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    More about this item

    Keywords

    Environmental Performance; Firms Profitability; Energy Intensity; Causal Effect;
    All these keywords.

    JEL classification:

    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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