The Influence of Environmental and Social Performance on Financial Performance: Evidence from Romania’s Listed Entities

Elena Dobre, Georgiana Oana Stanila and Laura Brad
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Elena Dobre: Faculty of Accounting and Management Information Systems, Bucharest University of Economic Studies, 6 Piata Romana, 1st district, Bucharest 010374, Romania
Georgiana Oana Stanila: Faculty of Accounting and Management Information Systems, Bucharest University of Economic Studies, 6 Piata Romana, 1st district, Bucharest 010374, Romania

Sustainability, 2015, vol. 7, issue 3, 1-41

Abstract: Companies that are listed on a stock exchange should know that reporting only financial measures is not enough for ensuring sustainable development. To be truly competitive, they should also include information about environmental policies and about the benefits that the company offers to its employees. The present research aims to provide information on how Romanian listed companies report environmental and social indicators and whether or not this has an impact on financial performance. We used a four time period panel fixed effect model for Romanian companies that are listed in the first category of the Bucharest Stock of Exchange. The results point out that increasing water, air and soil protection has a negative impact on current return on equity, while no effects were detected on return on assets and stock market returns. Other environmental variables such as gas, energy or sound were found not to be statistically significant. Training and benefits after retirement have a mixed effect on financial measures. The research correlates Romanian accounting regulation changes with companies’ characteristics and the influence of financial audit on financial performance, and concludes that increasing environmental and social protection could have an impact on financial performance in the long run, as positive correlation was detected between social or environmental performance and stock market returns one year after the changes occurred.

Keywords: environmental reporting; social reporting; financial auditor; financial performance; International Financial Reporting Standards (IFRS); panel model; Stock Exchange; Romania (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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