IDEAS home Printed from https://ideas.repec.org/a/eco/journ2/2017-06-11.html
   My bibliography  Save this article

How Powerful is Your Customers Reaction to Carbon Performance? Linking Carbon and Firm Financial Performance

Author

Listed:
  • Andewi Rokhmawati

    (Faculty of Economics and Business, Universitas Riau, Kampus Bina Widya Jl. HR Subrantas Km 12.5 Pekanbaru, Riau, Indonesia,)

  • Ardi Gunardi

    (Faculty of Economics and Business, Universitas Pasundan, Jalan Tamansari 6-8 Bandung, 40116, Indonesia,)

  • Matteo Rossi

    (Department of DEMM, University of Sannio, Via delle Puglie, 82, 82100 Benevento, Italy)

Abstract

This study aims to examine the effect of greenhouse gas (GHG) emissions on return on sales (ROS) that is moderated by customers response to firm activities to reduce GHG emissions. The moderating regression analysis with cross-sectional data was utilized to examine the effects. The sample comprised 102 listed manufacturing firms listed in the Indonesian capital market in 2011. Sampling was based on the availability of firms financial reports in 2011, annual reports in 2014 and the availability of data of firm about the types and amounts of fossil fuels, as well as the amount of electricity, consumed by the firms in 2011. Surprisingly, the results showed that CO2e intensity has a positive significant effect on ROS. Customers response to the firm effort to reduce GHG emission has a positive and significant effect on ROS. Finally, customers responses strengthen the effect of CO2e intensity on ROS. The finding of the positive significant effect of CO2e intensity on firm financial performance contrasts with the findings of previous studies carried out in several developed countries. The finding of the research is that the mediating variable of customers responses strengthens the effect of CO2e intensity on ROS. The positive significant effect found in this study has been explained with reference to Indonesia s particular circumstances as a developing country

Suggested Citation

  • Andewi Rokhmawati & Ardi Gunardi & Matteo Rossi, 2017. "How Powerful is Your Customers Reaction to Carbon Performance? Linking Carbon and Firm Financial Performance," International Journal of Energy Economics and Policy, Econjournals, vol. 7(6), pages 85-95.
    • Handle: RePEc:eco:journ2:2017-06-11
    as

    Download full text from publisher

    File URL: https://www.econjournals.com/index.php/ijeep/article/download/5752/3423
    Download Restriction: no
    File URL: https://www.econjournals.com/index.php/ijeep/article/view/5752/3423
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Michael C. Jensen, 2010. "Value Maximization, Stakeholder Theory, and the Corporate Objective Function," Journal of Applied Corporate Finance, Morgan Stanley, vol. 22(1), pages 32-42, January.
    2. Stuart L. Hart & Gautam Ahuja, 1996. "Does It Pay To Be Green? An Empirical Examination Of The Relationship Between Emission Reduction And Firm Performance," Business Strategy and the Environment, Wiley Blackwell, vol. 5(1), pages 30-37, March.
    3. Iwata, Hiroki & Okada, Keisuke, 2011. "How does environmental performance affect financial performance? Evidence from Japanese manufacturing firms," Ecological Economics, Elsevier, vol. 70(9), pages 1691-1700, July.
    4. Sanjay Sharma & Irene Henriques, 2005. "Stakeholder influences on sustainability practices in the Canadian forest products industry," Strategic Management Journal, Wiley Blackwell, vol. 26(2), pages 159-180, February.
    5. Su‐Yol Lee, 2012. "Corporate Carbon Strategies in Responding to Climate Change," Business Strategy and the Environment, Wiley Blackwell, vol. 21(1), pages 33-48, January.
    6. Takashi Hatakeda & Katsuhiko Kokubu & Takehisa Kajiwara & Kimitaka Nishitani, 2012. "Factors Influencing Corporate Environmental Protection Activities for Greenhouse Gas Emission Reductions: The Relationship Between Environmental and Financial Performance," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 53(4), pages 455-481, December.
    7. 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.
    8. Stern,Nicholas, 2007. "The Economics of Climate Change," Cambridge Books, Cambridge University Press, number 9780521700801, October.
    9. Ardi Gunardi & Erie Febrian & Aldrin Herwany, 2016. "The implication of firm-specific characteristics on disclosure: the case of Indonesia," International Journal of Monetary Economics and Finance, Inderscience Enterprises Ltd, vol. 9(4), pages 379-387.
    10. Chin Hee Hahn & Sang-Hyop Lee & Kyoung-Soo Yoon (ed.), 2012. "Responding to Climate Change," Books, Edward Elgar Publishing, number 14709.
    11. repec:eco:journ2:2017-04-23 is not listed on IDEAS
    12. Freedman, Martin & Jaggi, Bikki, 2005. "Global warming, commitment to the Kyoto protocol, and accounting disclosures by the largest global public firms from polluting industries," The International Journal of Accounting, Elsevier, vol. 40(3), pages 215-232.
    13. Amy J. Hillman & Gerald D. Keim, 2001. "Shareholder value, stakeholder management, and social issues: what's the bottom line?," Strategic Management Journal, Wiley Blackwell, vol. 22(2), pages 125-139, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Tete Saepudin, 2018. "Development of Electricity Program, Electrification Ratio with Human Development Index in West Java Province, Indonesia," International Journal of Energy Economics and Policy, Econjournals, vol. 8(1), pages 227-230.
    2. Maruli Sitompul & Arif Imam Suroso & Ujang Sumarwan & Nimmi Zulbainarni, 2023. "Revisiting the Impact of Corporate Carbon Management Strategies on Corporate Financial Performance: A Systematic Literature Review," Economies, MDPI, vol. 11(6), pages 1-21, June.
    3. Benkraiem, Ramzi & Dubocage, Emmanuelle & Lelong, Yann & Shuwaikh, Fatima, 2023. "The effects of environmental performance and green innovation on corporate venture capital," Ecological Economics, Elsevier, vol. 210(C).
    4. Obey Dzomonda & Olawale Fatoki, 2020. "Environmental Sustainability Commitment and Financial Performance of Firms Listed on the Johannesburg Stock Exchange (JSE)," IJERPH, MDPI, vol. 17(20), pages 1-21, October.
    5. Áron Szennay & Cecília Szigeti & Judit Beke & László Radácsi, 2021. "Ecological Footprint as an Indicator of Corporate Environmental Performance—Empirical Evidence from Hungarian SMEs," Sustainability, MDPI, vol. 13(2), pages 1-17, January.
    6. Fortune Ganda & Khazamula Samson Milondzo, 2018. "The Impact of Carbon Emissions on Corporate Financial Performance: Evidence from the South African Firms," Sustainability, MDPI, vol. 10(7), pages 1-22, July.
    7. Andewi Rokhmawati, 2020. "Profit Decomposition: Analyzing the Pathway from Carbon Dioxide Emission Reduction to Revenues and Costs," International Journal of Energy Economics and Policy, Econjournals, vol. 10(4), pages 150-160.
    8. Jamel Chouaibi, 2021. "Innovation and Financial Performance in Manufacturing Companies: an Empirical Study Tunisian," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 12(4), pages 1870-1890, December.
    9. Yeguan Yu, 2023. "The Impact of Financial System on Carbon Intensity: From the Perspective of Digitalization," Sustainability, MDPI, vol. 15(2), pages 1-22, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:eco:journ2:2017-04-23 is not listed on IDEAS
    2. Stefan Lewandowski, 2017. "Corporate Carbon and Financial Performance: The Role of Emission Reductions," Business Strategy and the Environment, Wiley Blackwell, vol. 26(8), pages 1196-1211, December.
    3. Francesca Di Pillo & Massimo Gastaldi & Nathan Levialdi & Michela Miliacca, 2017. "Environmental Performance Versus Economic-financial Performance: Evidence from Italian Firms," International Journal of Energy Economics and Policy, Econjournals, vol. 7(2), pages 98-108.
    4. Markus Hang & Jerome Geyer‐Klingeberg & Andreas W. Rathgeber, 2019. "It is merely a matter of time: A meta‐analysis of the causality between environmental performance and financial performance," Business Strategy and the Environment, Wiley Blackwell, vol. 28(2), pages 257-273, February.
    5. Lei Wang & Steven Li & Simon Gao, 2014. "Do Greenhouse Gas Emissions Affect Financial Performance? – an Empirical Examination of Australian Public Firms," Business Strategy and the Environment, Wiley Blackwell, vol. 23(8), pages 505-519, December.
    6. Chien‐Ming Chen & Maria J. Montes‐Sancho, 2017. "Do Perceived Operational Impacts Affect the Portfolio of Carbon‐Abatement Technologies?," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 24(3), pages 235-248, May.
    7. G Capece & F Di Pillo & M Gastaldi & N Levialdi & M Miliacca, 2017. "Examining the effect of managing GHG emissions on business performance," Business Strategy and the Environment, Wiley Blackwell, vol. 26(8), pages 1041-1060, December.
    8. Tzouvanas, Panagiotis & Kizys, Renatas & Chatziantoniou, Ioannis & Sagitova, Roza, 2020. "Environmental and financial performance in the European manufacturing sector: An analysis of extreme tail dependency," The British Accounting Review, Elsevier, vol. 52(6).
    9. Andewi Rokhmawati, 2020. "Profit Decomposition: Analyzing the Pathway from Carbon Dioxide Emission Reduction to Revenues and Costs," International Journal of Energy Economics and Policy, Econjournals, vol. 10(4), pages 150-160.
    10. Lee, Ki-Hoon & Min, Byung & Yook, Keun-Hyo, 2015. "The impacts of carbon (CO2) emissions and environmental research and development (R&D) investment on firm performance," International Journal of Production Economics, Elsevier, vol. 167(C), pages 1-11.
    11. Albert Czerny & Peter Letmathe, 2017. "Eco‐efficiency: GHG reduction related environmental and economic performance. The case of the companies participating in the EU Emissions Trading Scheme," Business Strategy and the Environment, Wiley Blackwell, vol. 26(6), pages 791-806, September.
    12. Andewi Rokhmawati & Nasti Weniagustin & Fitri Fitri & Haryetti Haryetti & Ifa Adina Yafiz, 2018. "Regulation of Reducing Carbon Emissions: Is It Effectively Implemented to Develop Competitiveness of Indonesian Manufacturing Firms?," International Journal of Energy Economics and Policy, Econjournals, vol. 8(6), pages 258-266.
    13. Timo Busch & Bryan T. Stinchfield & Matthew S. Wood, 2011. "A Triptych Inquiry: Rethinking Sustainability, Innovation, and Financial Performance," Tinbergen Institute Discussion Papers 11-026/2/DSF 9, Tinbergen Institute.
    14. Misani, Nicola & Pogutz, Stefano, 2015. "Unraveling the effects of environmental outcomes and processes on financial performance: A non-linear approach," Ecological Economics, Elsevier, vol. 109(C), pages 150-160.
    15. Sergio Manrique & Carmen-Pilar Martí-Ballester, 2017. "Analyzing the Effect of Corporate Environmental Performance on Corporate Financial Performance in Developed and Developing Countries," Sustainability, MDPI, vol. 9(11), pages 1-30, October.
    16. Isabel Gallego‐Álvarez & Isabel M. García‐Sánchez & Cléber da Silva Vieira, 2014. "Climate Change and Financial Performance in Times of Crisis," Business Strategy and the Environment, Wiley Blackwell, vol. 23(6), pages 361-374, September.
    17. Nikolaos Sariannidis & Eleni Zafeiriou & Grigoris Giannarakis & Garyfallos Arabatzis, 2013. "CO2 Emissions and Financial Performance of Socially Responsible Firms: An Empirical Survey," Business Strategy and the Environment, Wiley Blackwell, vol. 22(2), pages 109-120, February.
    18. Christian Felix Böttcher & Martin Müller, 2015. "Drivers, Practices and Outcomes of Low‐carbon Operations: Approaches of German Automotive Suppliers to Cutting Carbon Emissions," Business Strategy and the Environment, Wiley Blackwell, vol. 24(6), pages 477-498, September.
    19. Jan Endrikat, 2016. "Market Reactions to Corporate Environmental Performance Related Events: A Meta-analytic Consolidation of the Empirical Evidence," Journal of Business Ethics, Springer, vol. 138(3), pages 535-548, October.
    20. Franck Brulhart & Sandrine Gherra & Bertrand V. Quelin, 2019. "Do Stakeholder Orientation and Environmental Proactivity Impact Firm Profitability?," Journal of Business Ethics, Springer, vol. 158(1), pages 25-46, August.
    21. Stanley Kam Sing Wong, 2013. "Environmental Requirements, Knowledge Sharing and Green Innovation: Empirical Evidence from the Electronics Industry in China," Business Strategy and the Environment, Wiley Blackwell, vol. 22(5), pages 321-338, July.

    More about this item

    Keywords

    GHG Emissions; Return on Sales; Instrumental Stakeholder Theory; Indonesian Listed Manufacturing Firms.;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • L6 - Industrial Organization - - Industry Studies: Manufacturing
    • M1 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

    Statistics

    Access and download statistics

    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:eco:journ2:2017-06-11. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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: Ilhan Ozturk (email available below). General contact details of provider: http://www.econjournals.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.