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Location
Parker College of Business (PCOB)
Session Format
Oral Presentation
Co-Presenters and Faculty Mentors or Advisors
Dr. Gerard Burke, Faculty Advisor
Abstract
Organizations are increasingly pressurized by stakeholders to be environmentally concerned. Central tenants of corporate social responsibility; environmental, social and governance factors had garnered the attention of researchers but despite the number of studies done on environmental performance, the relationship between environmental and financial performance of firms remains ambiguous. Lack of consistent results about this relationship makes it difficult for businesses to gauge the feasibility of engaging in sustainable operations. Hence the purpose of the study lies in answering the managerial question, is it financially worthwhile to invest in improving environmental performance. The study uses data on 220 firm-year observations from 2015 to 2019, where GHG emission levels to measure environmental performance are extracted from Bloomberg and financial performance measured as operating ROA is obtained from Compustat. After conducting hierarchical regression analysis on the data, we found that higher GHG emission levels lead to lower profitability of the company. The investigation of the moderating effect of operational productivity (OP) on the main relationship revealed that companies controlling for GHG emissions can achieve substantial profitability only in the presence of high OP levels. Accordingly, a company should be operationally productive to achieve substantial benefits on profitability expected from controlling for GHG emissions.
Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 License.
Presentation Type and Release Option
Presentation (Open Access)
Recommended Citation
Gurukandage, Senali, "Exploring the Relationship between Environmental Performance of Firms and Profitability: The Effect of Operational Productivity" (2021). GS4 Georgia Southern Student Scholars Symposium. 18.
https://digitalcommons.georgiasouthern.edu/research_symposium/2021/2021/18
Exploring the Relationship between Environmental Performance of Firms and Profitability: The Effect of Operational Productivity
Parker College of Business (PCOB)
Organizations are increasingly pressurized by stakeholders to be environmentally concerned. Central tenants of corporate social responsibility; environmental, social and governance factors had garnered the attention of researchers but despite the number of studies done on environmental performance, the relationship between environmental and financial performance of firms remains ambiguous. Lack of consistent results about this relationship makes it difficult for businesses to gauge the feasibility of engaging in sustainable operations. Hence the purpose of the study lies in answering the managerial question, is it financially worthwhile to invest in improving environmental performance. The study uses data on 220 firm-year observations from 2015 to 2019, where GHG emission levels to measure environmental performance are extracted from Bloomberg and financial performance measured as operating ROA is obtained from Compustat. After conducting hierarchical regression analysis on the data, we found that higher GHG emission levels lead to lower profitability of the company. The investigation of the moderating effect of operational productivity (OP) on the main relationship revealed that companies controlling for GHG emissions can achieve substantial profitability only in the presence of high OP levels. Accordingly, a company should be operationally productive to achieve substantial benefits on profitability expected from controlling for GHG emissions.
