Do environmentally sustainable practices lead to financially less constrained firms? International evidence

Rajabrata Banerjee, Kartick Gupta and Priyantha Mudalige

International Review of Financial Analysis, 2020, vol. 68, issue C

Abstract: In this study, we utilise a comprehensive dataset from 41 countries spanning 2002–2013 and show that environmentally sustainable practices (ESP) are negatively associated with financial constraints of firms. We refine ESP into three components: emission reduction, product innovation and resource reduction, and show that firms which are more innovative and efficient in reducing wastage of resources are most benefited by ESP. The findings are even stronger for firms operating in countries with high institutional qualities, in high emission and highly competitive industries. These results are important to lending institutions for making financing decisions. Policymakers and investors could also utilise ESP as a key distinguishing factor for firms to benefit from lower financial constraints. Appropriate support and initiatives from local and national regulators could motivate firms to be more environmentally friendly.

Keywords: Financial constraints; Environmentally sustainable practices; Institutional quality (search for similar items in EconPapers)
JEL-codes: D40 L10 L60 O30 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1057521918305015
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:68:y:2020:i:c:s1057521918305015

DOI: 10.1016/j.irfa.2019.03.009

Access Statistics for this article

International Review of Financial Analysis is currently edited by B.M. Lucey

More articles in International Review of Financial Analysis from Elsevier
Bibliographic data for series maintained by Catherine Liu ().