Nexus between Profitability and Environmental Performance of Indian Firms: An Analysis with Granger Causality

Vasanth Vinayagamoorthi, Selvam Murugesan (), Kasilingam Lingaraja and Ramachandran Rajesh Ramkumar
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Kasilingam Lingaraja: Department of Commerce and Financial Studies, Bharathidasan University, Tiruchirappalli, Tamil Nadu, India,
Ramachandran Rajesh Ramkumar: Department of Business Administration, Bharathidasan University Model College, Vedaranyam, Nagapattinam Tamil Nadu, India.

International Journal of Energy Economics and Policy, 2015, vol. 5, issue 2, 433-439

Abstract: Sustainable development enhances the human life, with good eco facilities. The way to move toward the sustainable development is by giving best solutions to the issues of unbalanced ecological, environmental and economic development. This paper investigates the relationship between the environmental performance and the profitability variables such as return on assets (ROA), return on equity (ROE), return on capital employed (ROCE), and return on sales (ROS) of the sample firms in India. Granger causality test was used to examine bidirectional causality running from energy intensity (EI) to profitability of the firm. The study identified causal relationship that existed among the environmental performance and profitability of the firm. Further, it is found that there was an inverse relationship between ROCE and EI of the firm while direct relationship existed among ROA, ROE, ROS and EI. It is suggested that the practitioners, policy makers etc. may adopt the environment friendly technologies and encourage the Indian firms to use more energy efficient technology.

Keywords: Environmental Performance; Firms Profitability; Energy Intensity; Causal Effect (search for similar items in EconPapers)
JEL-codes: L25 M14 Q01 Q4 Q51 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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