Unraveling the effects of environmental outcomes and processes on financial performance: A non-linear approach

Nicola Misani and Stefano Pogutz

MPRA Paper from University Library of Munich, Germany

Abstract: We examine the roles of the outcome and process dimensions of environmental performance in determining financial performance as measured by Tobin’s q. Outcomes refer to the impacts of the firm on the natural environment, while processes are the firm’s actions to reduce these outcomes. We focus on a specific outcome—carbon emissions—and suggest that it affects Tobin’s q non-linearly. We find that firms achieve the highest financial performance when their carbon performance is neither low nor high, but intermediate. We also find that environmental processes moderate this relationship as they reinforce firms’ financial performance through improved stakeholder management. This mixed picture suggests that firms do not generally internalize the costs of poor carbon performance, but those that stand out in both environmental outcomes and processes achieve net financial benefits. These findings are based on a sample of carbon-intensive firms that disclosed their greenhouse gas (GHG) emissions through the Carbon Disclosure Project from 2007 through 2013.

Keywords: GHG emissions; climate change; environmental management; financial performance; Tobin’s q (search for similar items in EconPapers)
JEL-codes: C21 L20 M13 Q20 (search for similar items in EconPapers)
Date: 2014-11-21
New Economics Papers: this item is included in nep-bec, nep-ene, nep-env, nep-ppm and nep-res
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Published in Ecological Economics 109.1(2015): pp. 150-160

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Journal Article: Unraveling the effects of environmental outcomes and processes on financial performance: A non-linear approach (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:60359

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