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Operational Competitiveness and the Relationship between Corporate Environmental and Financial Performance

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  • Senali Amarasuriya

    (Department of Management, Middle Tennessee State University, Murfreesboro, TN 37132, USA)

  • Gerard Burke

    (Department of Logistics and Supply Chain Management, Parker College of Business, Georgia Southern University, Statesboro, GA 30460, USA)

  • Ta Kang Hsu

    (Department of Logistics and Supply Chain Management, Parker College of Business, Georgia Southern University, Statesboro, GA 30460, USA)

Abstract

With increasing pressures on big businesses to expand performance objectives beyond financial metrics and to include social and environmental objectives, business organizations experience rising tension in balancing these various objectives. Oftentimes, subjective narratives can weigh in on the relative importance of competing objectives. This subjectivity is a contributing factor to findings of inconsistent and mixed results for the financial impact of an organization’s environmental performance in the prior literature. Our research effort seeks to provide a positivist perspective on the relationship between environmental performance and financial performance of companies. Also, given the importance of efficient operations for corporate success, we examine the influence of operational productivity on the environmental and financial performance relationship. Using a global dataset compiled from reputable sources, including 1738 unique firms spanning between the years 2011 and 2020, we find statistically significant results that indicate that lower carbon emissions are associated with higher profitability when a firm has competitively high operational productivity. Companies with operational productivity that is competitively low do not perform well financially when carbon emissions are low. Thus, our study fills a research gap in this domain by relying exclusively on a broad set of purely objective data and illuminating the importance of operational efficiency on the relationship between the environmental performance and financial performance of firms.

Suggested Citation

  • Senali Amarasuriya & Gerard Burke & Ta Kang Hsu, 2024. "Operational Competitiveness and the Relationship between Corporate Environmental and Financial Performance," JRFM, MDPI, vol. 17(8), pages 1-17, August.
    • Handle: RePEc:gam:jjrfmx:v:17:y:2024:i:8:p:364-:d:1457058
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    References listed on IDEAS

    as
    1. Willam Greene, 2005. "Fixed and Random Effects in Stochastic Frontier Models," Journal of Productivity Analysis, Springer, vol. 23(1), pages 7-32, January.
    2. Guo Li & Na Li & Suresh P. Sethi, 2021. "Does CSR Reduce Idiosyncratic Risk? Roles of Operational Efficiency and AI Innovation," Production and Operations Management, Production and Operations Management Society, vol. 30(7), pages 2027-2045, July.
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