Abstract
This study comprehensively investigates when and how environmental performance impacts financial performance in a multi-country sample. This study applies GMM by using a panel of 161 Climate Action 100 + companies from 34 countries encompassing 2015 to 2021. Our analysis shows that firms’ environmental performance positively contributes to financial performance, and results are robust to the alternative measures. The results show that competitive advantage mediates the relationship between environmental performance and financial performance. Similarly, voluntary environmental regulation adoption contextually and environmental management positively moderate the relationship and reduce the negative impact of pollution on financial performance. We conclude that firms should move from Friedman’s profit maximization philosophy towards Hart’s natural-resource-based view of pollution prevention and product stewardship for securing sustainable financial performance. Our findings have significant implications for managers, companies, and policymakers who are concerned with business operations, environmental performance, and carbon emissions mitigation strategies.
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Notes
Product stewardship is an approach to managing the environmental impacts of different products and materials and at different stages their production.
“However, firms are better able to cope with the shocks of environmental regulations may automatically have better financial fundamentals” (Zheng and He, 2022, p. 44548).
“We also test dynamic effects in the models which include a lagged dependent variable to handle the impact of the past period of the firm performance on the present period (Mohammad et al., 2020). The GMM approach (Arellano & Bond, 1991) is applied to generate estimators, which provide consistent evidences for testing the Hypotheses” (Zhang et al., 2020 p,. 21).
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“This research was financially supported by a funding from Anhui Polytechnic University (S022023048) received by SA.”
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Aamir Azeem: Writing—initial draft, Writing—analysis, Visualization and validation.
Muhammad Akram Naseem: Review, editing, and supervision. Rizwan Ali: Writing literature review, editing. Shahid Ali: Visualization and validation, writing literature review, writing—analysis, editing.
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Azeem, A., Naseem, M.A., Ali, R. et al. How Does Environmental Performance Contribute to Firm Financial Performance in a Multi-country Study? Mediating Role of Competitive Advantage and Moderating Role of Voluntary Environmental Initiatives. J Knowl Econ (2024). https://doi.org/10.1007/s13132-024-02193-4
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DOI: https://doi.org/10.1007/s13132-024-02193-4