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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
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    References listed on IDEAS

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    Cited by:

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    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.
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    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.

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    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

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