When to Maximize Green Benefits in the Construction and Engineering Industry? Perspectives from Risk Modifying Factors

Qian Xu () and Yujie Lu ()
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Qian Xu: National University of Singapore
Yujie Lu: Tongji University

A chapter in Proceedings of the 23rd International Symposium on Advancement of Construction Management and Real Estate, 2021, pp 945-955 from Springer

Abstract: Abstract In recent years, it has become an increasingly heated topic to integrate environmental friendly strategies into either business planning or governments’ rules and regulation. However, it is appreciated that the nature of various activities involved in environmental sustainable investment is largely determined by risks or uncertainties, which may offset the added return from green investment. So, this article attempts to find out when will be the best time with relatively less risks from market and individual perspective for construction and engineering companies’ going green. The Difference-in-Difference (DID) analysis is employed to quantify changes of rate of return before and after going green under different risk exposures. 2301 listed companies are selected worldwide from 2000 to 2016, and among them, 1141 are green companies, which embrace green investment strategies. The results show that going green significantly increases the rate of return by 1.05% (from 10.56% to 11.61%). However, market risk will significantly influence the effect of green strategies, as going green is likely to place construction and engineering firms under higher credit risk exposures. Thus, it is suggested that decision makers are better to launch their green strategies when market is stable and also to balance leverage as 1% add of leverage measure will increase 6% probability of default. The primary knowledge contribution of this study is that it reveals the most suitable time to go green from the perspective of risk analysis.

Keywords: Environmentally-friendly corporate strategies; Construction and engineering companies; Different-in-Difference analysis; Risk adjusted return; Credit risk analysis (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-981-15-3977-0_71

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DOI: 10.1007/978-981-15-3977-0_71

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