umu.sePublications
Change search
ReferencesLink to record
Permanent link

Direct link
The moderating effects of environmental risk of the industry on the relationship between corporate environmental and financial performance
Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE), Business Administration. (RiseB)
Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE), Business Administration. (RiseB)
2016 (English)In: Journal of Applied Accounting Research, Vol. 17, no 1, 97-114 p.Article in journal (Refereed) Published
Abstract [en]

Purpose–Industries differ in their environmental impacts, such as emissions, water and energy use, fuel consumption and hazardous wastes, which will have implications for how environmental performance translates to operating performance and market value at company level. By incorporating industry-specific differences of environmental impacts, this paper includes industry-level environmental risk as a moderating factor on the relationship between two indicators of corporate environmental performance (CEP) (management and policy) and corporate financial performance (profitability and market value). The paper aims to discuss these issues. Design/methodology/approach– Using panel data of US companies across all industries, the paper empirically tests a regression model, which includes an interaction effect representing both the form and strength of dependency of CEP on the environmental risk of the industry. The paper adopts the natural resource based theory to argue that financial returns are a decreasing function of CEP in high environmental impact industries, where environmental spending beyond compliance is costly and there is not much opportunity for consumer orientation. Findings– The results show that environmental management has different impacts on operating performance at high and low environmental risk of the industry (form of relationship) while environmental policy (reporting) has a stronger signal on market premium in industries with low rather than high environmental risk (strength of relationship). Differences in both form and strength of moderating effects are demonstrated. Research limitations/implications– Further research can introduce other industry-specific moderating factors, such as the disclosure maturity of the industry and the institutionalization of environmental disclosures across boarders in the industries, in order to explore the complexity of the relationship. Practical implications– The results of the paper are relevant to investors, company managers and a broad group of stakeholders when considering both industry- and company-level environmental risks. Originality/value– Previous studies have relied on controlling for industry membership. This paper uses an industry-specific environmental variable, environmental risk of the industry, to examine the form and strength of moderating effects.

Place, publisher, year, edition, pages
Emerald Group Publishing Limited, 2016. Vol. 17, no 1, 97-114 p.
Keyword [en]
Environmental impacts, Environmental policy, Market value, Moderating effects, Environmental management, Corporate environmental performance, Corporate financial performance, Environmental risk of the industry, Operating performance
National Category
Business Administration
Identifiers
URN: urn:nbn:se:umu:diva-114681DOI: 10.1108/JAAR-09-2013-0071OAI: oai:DiVA.org:umu-114681DiVA: diva2:897521
Projects
SIRP
Funder
Mistra - The Swedish Foundation for Strategic Environmental Research
Note

USBESDA

Available from: 2016-01-25 Created: 2016-01-25 Last updated: 2016-03-12

Open Access in DiVA

No full text

Other links

Publisher's full text

Search in DiVA

By author/editor
Hassel, Lars G
By organisation
Business Administration
Business Administration

Search outside of DiVA

GoogleGoogle Scholar
The number of downloads is the sum of all downloads of full texts. It may include eg previous versions that are now no longer available

Altmetric score

Total: 186 hits
ReferencesLink to record
Permanent link

Direct link