Effect of Corporate Environmental Investments on FinancialPerformance in Mining and Manufacturing Companies Listed on the Johannesburg Stock Exchange Social Responsibility Index

Michael Bamidele Fakoya () and Kevin Tinashe Chitepo ()
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Michael Bamidele Fakoya: University of Limpopo
Kevin Tinashe Chitepo: University of Limpopo

Acta Universitatis Danubius. OEconomica, 2019, issue 15(3), 142-156

Abstract: This article investigates the relationship between corporate environmental investment and financial performance. The article examines the effect of carbon emission reduction and hazardous solid waste disposal on companies’ return on assets. The paper adopts a quantitative research design by analysing secondary data from the financial statements of companies listed on the Social Responsibility Index consecutively from 2008 to 2017. Panel data analysis consisting of the random and fixed effects models was used to analyse the data. The study adopted the Hausman test to determine the most appropriate model. Data were tested for multicollinearity and heteroscedasticity in order to enhance the reliability of the regression results. The results produced a mixed result showing positive gains between carbon emissions reduction and return on assets while the hazardous solid waste reduction was negatively related to return on assets. Our results have significant managerial implications as it was established that corporate environmental investment to reduce carbon emissions is vital as they result in different cost savings. Conversely, investments to reduce hazardous solid waste disposal are equally essential to establish and maintain a sustainable operational environment and to enhance stakeholder relations but have no direct influence on return on assets.

Keywords: environmental investment; financial performance, return on assets; carbon emission reduction; hazardous solid waste (search for similar items in EconPapers)
Date: 2019
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