Environmental and financial performance in the European manufacturing sector: An analysis of extreme tail dependency

Panagiotis Tzouvanas, Renatas Kizys, Ioannis Chatziantoniou and Roza Sagitova

The British Accounting Review, 2020, vol. 52, issue 6

Abstract: In this study, we investigate the impact of environmental performance on financial performance. We argue that environmental performance heterogeneously affects firms with different profitability level. Using data for 288 European manufacturing firms over the period 2005–2016, we investigate the said relationship under the financial slack argument and the contrasting paradigms of neoclassical and the instrumental stakeholder theory. Employing a quantile regression framework enriched with a set of instrumental variables to more effectively approximate environmental performance, we find (i) firms with superior environmental performance tend to be more profitable; (ii) the relationship between environmental and financial performance can be characterised as positive and heterogeneous across the conditional distribution; (iii) financial and environmental performance are endogenously related only when high profitability firms are examined.

Keywords: Financial performance; Environmental performance; Quantile regressions (search for similar items in EconPapers)
JEL-codes: C14 L25 Q51 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:bracre:v:52:y:2020:i:6:s0890838919300885

DOI: 10.1016/j.bar.2019.100863

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