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Environmental Efforts and Firm Performance

Dyna Seng and Chaiporn Vithessonthi
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Dyna Seng: University of Otago

PIER Discussion Papers from Puey Ungphakorn Institute for Economic Research

Abstract: In this paper, we test the prediction that environmental efforts, presenting one dimension of corporate social responsibility, are positively related to firm performance. We analyze a panel sample of non-financial firms in the Netherlands over the period 2001-2014 using two approaches: ordinary least squares regressions and two-stage least squares regressions. Our two-stage least squares regressions show that firms with higher degrees of environmental efforts have better firm performance, measured as return on assets, but have poorer firm performance, measured as return on sales. However, this relationship disappears when firm performance is measured as return on equity or stock return. Our analysis further reveals that better firm performance does not necessarily lead to a disclosure of a firm's environmental efforts. We find that larger firms are more inclined to report the environmental efforts than smaller firms. Neither prior firm performance nor variation in firm performance moderates the effect of environmental efforts on firm performance.

Keywords: Corporate investment; environmental performance; renewable energy; firm performance, Netherlands (search for similar items in EconPapers)
JEL-codes: F21 F23 G31 G32 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2017-07, Revised 2017-07
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