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The curvilinear relationship between environmental performance and financial performance: An investigation of listed french firms using panel smooth transition model

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  • Ben Lahouel, Béchir
  • Bruna, Maria-Giuseppina
  • Ben Zaied, Younes

Abstract

We employ the Panel Smooth Transition Regression model to explore the non-linear relationship between environmental performance and financial performance. Our main purpose is to ask to the longstanding question ‘when it pays to be green?’ by identifying the threshold values of environmental performance that determine the smoothness of regime switching. Using a panel of 61 French companies from 2005 to 2017, our results show an inverted-U relationship and an inverted-V relationship when Tobin's Q and ROA are respectively used. Our findings support the standard microeconomic theory as well as the outcomes of environmental regulations within the Porter Hypothesis theoretical reasoning.

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  • Ben Lahouel, Béchir & Bruna, Maria-Giuseppina & Ben Zaied, Younes, 2020. "The curvilinear relationship between environmental performance and financial performance: An investigation of listed french firms using panel smooth transition model," Finance Research Letters, Elsevier, vol. 35(C).
    • Handle: RePEc:eee:finlet:v:35:y:2020:i:c:s1544612319306658
    DOI: 10.1016/j.frl.2020.101455
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