Comparison among U.S. industrial sectors by DEA environmental assessment: Equipped with analytical capability to handle zero or negative in production factors

A green image is recently an important component of corporate sustainability in modern business. By extending the two previous works (i.e., Wang et al., 2014; Sueyoshi and Wang, 2014a), this study discusses a new use of Data Envelopment Analysis (DEA) for environmental assessment by incorporating an analytical capability to handle zero and/or negative in a data set. The proposed approach provides us with not only new quantitative assessment on unified (operational and environmental) performance of firms but also information regarding how to invest for eco-technology innovation for abating an amount of their industrial pollutions. According to the previous studies, the energy industry is an attractive investment target if desirable outputs are measured by Return on Assets (ROA) as a short-term concern and an amount of CO2 emission reduction. The selection on a desirable output combination is important in understanding the corporate sustainability of the energy industry because it is the largest emitter among seven industry sectors examined in the previous studies. However, if the ROA is replaced by a corporate value, measured by Tobin's q ratio as a long-term concern, the energy industry is not so attractive because it uses a very large production process so that green investment does not immediately increase the corporate value. An empirical problem of these previous studies is that they have investigated only successful companies with positive ROA or Tobin's q ratios. The analytical feature clearly indicates a methodological drawback of their studies. In contrast, this study pays attention to both successful companies with positive net incomes and unsuccessful companies with negative net incomes, so being able to measure all aspects of their performance in a short-term concern. This study finds that the energy industry exhibits a high level of potential on green investment. However, the energy industry may be not attractive even in the short-term concern (i.e., net income), partly because governmental regulations on their operation and pollution prevention efforts are stricter than the other industrial sectors. This result may be seemingly inconsistent with Wang et al. (2014). Rather, the result indicates that successful energy firms can attain the corporate sustainability by investing eco-technology innovation, but unsuccessful ones cannot attain the sustainability, even in the short-term concern, because they do not have large capital accumulation for eco-technology investment whose importance has been first discussed by Sueyoshi and Goto (2010a). In other words, the eco-technology investment for enhancing a high level of corporate sustainability depends upon an amount of net income generated by each energy firm.