Corporate environmental responsibility and firm growth: International evidence from SMEs

Barkat Ullah

Review of Financial Economics, 2025, vol. 43, issue 3, 383-406

Abstract: The recent worldwide concerns about environmental problems are reflected by firms' environmentally responsible actions and practices, which improve the environment and provide firms with beneficial outcomes. In this paper, we examine the impact of corporate environmental responsibility (CER) on growth for 16,040 primarily small and medium‐sized enterprises (SMEs) from 30 Eastern European and Central Asian countries. We also investigate the effects of country‐level economic development and institutional conditions on the CER–firm growth relationship. We find that CER leads to faster growth for SMEs. Environmentally responsible firms experience higher sales growth, employment growth, and productivity growth than conventional firms. The positive effect of firms' environmentally responsible practices on their growth prevails both in developed and developing countries. We also find that the beneficial impact of CER on growth is stronger in countries with poor institutional quality and weak governance mechanisms.

Date: 2025
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https://doi.org/10.1002/rfe.70005

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Persistent link: https://EconPapers.repec.org/RePEc:wly:revfec:v:43:y:2025:i:3:p:383-406

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