Environmental responsibility, CEO power and financial performance in the energy sector
Siew − Peng Lee ()
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Siew − Peng Lee: Universiti Tunku Abdul Rahman
Review of Managerial Science, 2021, vol. 15, issue 8, No 9, 2407-2426
Abstract This paper examines the impact of environmental responsibility on financial performance among firms in the energy sector. In addition, this study also assesses whether CSR and environmental responsibility are more value enhancing for firms with powerful CEOs. The sample consists of 75 firms obtained from the MSCI World Energy index from 2013 to 2017. Two − stage least − squares estimation is applied. The result shows that environmental responsibility practices positively affect a firm’s financial performance. When the three individual dimensions of environmental responsibility are considered, product innovation and resource reduction are positively associated with the firms’ financial performance, but emission reduction is not significant. In addition, this study finds no support for CEO power moderating the relationship between CSR and financial performance, or between environmental responsibility and financial performance. The evidence suggests that in the presence of CEO power, corporate environmental and social activities are not due to agency motives but rather something that is good for the firm and value enhancing, which is consistent with the stakeholder theory of corporate social responsibility.
Keywords: Agency theory; Stakeholder theory; CEO power; Environmental responsibility; Financial performance (search for similar items in EconPapers)
JEL-codes: M14 (search for similar items in EconPapers)
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