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The effects of environmental sustainability and R&D on corporate risk-taking: International evidence

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  • Banerjee, Rajabrata
  • Gupta, Kartick

Abstract

In this paper, we ask an important question: can firm-level environmentally sustainable practices and research and development (R&D) intensity individually and jointly affect corporate risk-taking? Using firm-level data from 41 countries spanning 2002–2013, we find environmentally sustainable practices and R&D intensity enhance the risk-taking of firms. Voluntary sustainable practices generate a positive and significant effect on corporate risk-taking. We also find that country-level determinants play a complementary role. Firms operating in countries with better intellectual property rights protection and overall infrastructure benefit more from environment-friendly practices and R&D intensity. Further, we find that ESI has a positive effect on risk taking in countries with higher CO2 emissions per capita, energy usages per capita and more stringent environmental policies. These results are robust after correcting for potential endogeneity, alternative measures of R&D intensity or ESI score. Overall, our findings provide key insights on policy recommendations at the national and international levels.

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  • Banerjee, Rajabrata & Gupta, Kartick, 2017. "The effects of environmental sustainability and R&D on corporate risk-taking: International evidence," Energy Economics, Elsevier, vol. 65(C), pages 1-15.
    • Handle: RePEc:eee:eneeco:v:65:y:2017:i:c:p:1-15
    DOI: 10.1016/j.eneco.2017.04.016
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    More about this item

    Keywords

    R&D; Risk-taking; Environment; Sustainability;
    All these keywords.

    JEL classification:

    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • F30 - International Economics - - International Finance - - - General

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