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Threshold Effect Analysis of the Relationship between Environmental Responsibility and Financial Performance

Author

Listed:
  • Thomas Adomah Worae

    (University of Limpopo, South Africa)

  • Collins C. Ngwakwe

    (University of Limpopo, South Africa)

  • Cosmas C. Ambe

    (University of Limpopo, South Africa)

Abstract

The paper examines environmental responsibility threshold effect on the financial performance of JSE SRI’s firms for the period 2008–2014. Employing bootstrap dynamic panel threshold estimations, the paper confirms the existence of triple threshold in all the regression relationship. Furthermore, the study established a nonlinear (inverted U-shape) association between environmental initiative,measured by energy usage intensity and return on sale, and a linear (inverse U-shape) relationship between carbon input intensity and market value of equity deflated by sale.We also found that return on sale decreases by –0.08868 when environmental responsibility, measured by energy usage intensity ratio exceeds 0.00093. The results however showed that an increase in energy usage intensity ratio at any point increases equity returns.

Suggested Citation

  • Thomas Adomah Worae & Collins C. Ngwakwe & Cosmas C. Ambe, 2018. "Threshold Effect Analysis of the Relationship between Environmental Responsibility and Financial Performance," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 16(4 (Winter), pages 355-377.
    • Handle: RePEc:mgt:youmgt:v:16:y:2018:i:4:p:355-377
    DOI: 10.26493/1854-6935.16.355-377
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    References listed on IDEAS

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    Cited by:

    1. Peterson K. Ozili, 2022. "Sustainability and Sustainable Development Research around the World," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 20(3 (Fall)), pages 259-293.

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    More about this item

    Keywords

    emissions intensity; energy usage intensity; financial performance; threshold effect; South Africa;
    All these keywords.

    JEL classification:

    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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