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Environmental Efforts and Firm Performance

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  • Dyna Seng
  • Chaiporn Vithessonthi

Abstract

In this paper, we test the prediction that environmental efforts, presenting one dimension of corporate social responsibility, are positively related to firm performance. We analyze a panel sample of non-financial firms in the Netherlands over the period 2001–2014 using two approaches: ordinary least squares regressions and two-stage least squares regressions. Our two-stage least squares regressions show that firms with higher degrees of environmental efforts have better firm performance, measured as return on assets, but have poorer firm performance, measured as return on sales. However, this relationship disappears when firm performance is measured as return on equity or stock return. Our analysis further reveals that better firm performance does not necessarily lead to a disclosure of a firm's environmental efforts. We find that larger firms are more inclined to report the environmental efforts than smaller firms. Neither prior firm performance nor variation in firm performance moderates the effect of environmental efforts on firm performance.

Suggested Citation

  • Dyna Seng & Chaiporn Vithessonthi, 2017. "Environmental Efforts and Firm Performance," PIER Discussion Papers 64, Puey Ungphakorn Institute for Economic Research.
    • Handle: RePEc:pui:dpaper:64
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    References listed on IDEAS

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    More about this item

    Keywords

    Corporate investment; environmental performance; renewable energy; firm performance; Netherlands;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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