Do Carbon Performance and Disclosure Practices Effect Companies’ Financial Performance: A Non-Linear Perspective

Suchismita Ghosh (), Ritu Pareek () and Tarak Nath Sahu ()
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Suchismita Ghosh: Vidyasagar University
Ritu Pareek: Vidyasagar University
Tarak Nath Sahu: Vidyasagar University

Asia-Pacific Financial Markets, 2024, vol. 31, issue 3, No 8, 733-754

Abstract: Abstract To find out how carbon performance and disclosure practices affects corporate’s financial performance, this study investigates its non-linear influence on financial performance by considering non-financial 100 businesses that are listed on National Stock Exchange 200 Index in India for the consecutive 12 years, i.e., from 2010 to 2021. It employs two indicators of environmental-related information like carbon performance which is measured in terms of greenhouse gas reduction, and disclosure practices which is measured in terms of environmental disclosure score. It uses the dynamic panel data regression analysis technique to estimate the parameters. The empirical outcomes show an obvious non-linear impact of carbon performance on corporate financial performance, which is proxied by Tobin’s Q. This indicates that at the initial stage, carbon performance decreases financial performance, but later on, further increase in the carbon performance is found to improve corporates financial performance in the long duration. But, in case of disclosure practices it shows no effect on market-based economic performance, i.e., Tobin’s Q. Therefore, the study recommends the investors to be courageous and patience because carbon performance will decrease financial performance at the lower level, but can give benefits in the long run. This paper also suggests the regulators to incorporate environmental standards, and introduce severe forfeits for ecological wrongdoers with the aim of enhancing companies’ environmental disclosure activities.

Keywords: Carbon performance; Disclosure practices; National stock exchange; Dynamic panel data analysis; Financial performance; Non-linear relationship (search for similar items in EconPapers)
JEL-codes: C23 C24 E44 O16 Q4 Q5 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s10690-023-09428-5

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