How does environmental performance affect financial performance? Evidence from Japanese manufacturing firms

Hiroki Iwata and Keisuke Okada

MPRA Paper from University Library of Munich, Germany

Abstract: This paper examines the effects of environmental performance on financial performance using the data of Japanese manufacturing firms from 2004 to 2008. As the environmental performance, our study considers the two different environmental issues of waste and greenhouse gas emissions in capturing the effects of corporate environmental management on financial performance. In addition, to clarify how each financial performance responds to a firm’s effort in dealing with different environmental issues, we utilize many financial performance indices reflecting various market evaluations. Our estimation results show the different effects of each environmental performance on financial performances. For example, while an increase in waste emissions generally improves financial performance, their reduction ameliorates financial performance in dirty industries. In addition, while greenhouse gas reduction leads to an increase in return on equity, it does not have a significant effect on return on sales which reflects the evaluation in the goods market, and it leads to a decrease in the natural logarithm of Tobin’s q, which indicates the value of intangible assets.

Keywords: Environmental Performance; Financial Performance; Japanese Manufacturing Firms; Waste Emissions; Greenhouse Gas Emissions (search for similar items in EconPapers)
JEL-codes: D21 Q53 Q56 (search for similar items in EconPapers)
Date: 2010-12-28
New Economics Papers: this item is included in nep-ene and nep-env
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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