The moderating effects of environmental risk of the industry on the relationship between corporate environmental and financial performance

2016 ◽  
Vol 17 (1) ◽  
pp. 97-114 ◽  
Author(s):  
Natalia Semenova ◽  
Lars G. Hassel
Keyword(s):  
Financial Performance ◽  
Environmental Impacts ◽  
Environmental Risk ◽  
Environmental Performance ◽  
Energy Use ◽  
Operating Performance ◽  
Market Value ◽  
Moderating Effects ◽  
Content Type ◽  
The Relationship

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.

The moderating effects of a board of directors on FDI’s international diversification in Turkey

2015 ◽  
Vol 23 (1) ◽  
pp. 61-88 ◽  
Author(s):  
Kader Şahin ◽  
Seyfettin Artan ◽  
Seda Tuysuz
Keyword(s):  
Financial Performance ◽  
Board Of Directors ◽  
International Diversification ◽  
Moderating Effect ◽  
Moderating Effects ◽  
Outside Directors ◽  
Moderator Variable ◽  
Content Type ◽  
Board Characteristics ◽  
The Relationship

Purpose – This paper aims to investigate the moderating effects of a board of directors on foreign direct investment (FDI)’s international diversification in Turkey. Design/methodology/approach – A sample of Turkish multinational firms with FDI was used. Two different aspects of international diversification were considered: the relationship between international diversification and financial performance and the moderating effect of board composition on the relationship between international diversification and the firm’s financial performance. Firm-level data were obtained from the Istanbul Stock Exchange in Turkey. Findings – The findings reveal that international diversification leads to better financial performance according to market-based measures. On the other hand, this study indicates that the board characteristics have a moderating effect on international diversification and financial performance. Research limitations/implications – The study is based on a sample of publicly listed firms in Turkey, and this restriction limits the generalizability of the findings. Practical implications – The internalization efforts of Turkish FDI have led to better financial performance in terms of market-based measures. The results have stated that the interest of independent outside directors is aligned with lower-risk investment decisions. Independence of independent outside directors in Turkey is interrogated by practitioners or the Capital Markets Board of Turkey. The larger board size which a moderator variable is provided, the wider shareholder value in Turkey is. Social implications – One can understand that the development of market-supporting institutions provides the support for entry to an emerging economy which is inefficient or incomplete markets and highly concentrated family ownership. Originality/value – These findings provide important implications for corporate governance and highlight the need for further research on the role of governance in firm internationalization. This study not only helps to understand how board characteristics affect the choice of international diversification decisions, but the results also allow to assess the performance implications of these choices for a particular period.

An insight into the associations between environmental activity management, environmental management systems and performance

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Kevin Baird ◽  
Sophia Xia Su ◽  
Amy Tung
Keyword(s):  
Environmental Management ◽  
Financial Performance ◽  
Environmental Performance ◽  
Management Systems ◽  
Environmental Management Systems ◽  
Content Type ◽  
Activity Management ◽  
The Relationship ◽  
Insight Into ◽  
Environmental Activity

Purpose This study uses the survey method to examine the associations between the three levels of environmental activity management (EAM) (environmental activity analysis, environmental activity cost analysis and environmental activity based costing) with environmental management systems (EMSs), and assesses the effectiveness of these EAM practices and EMSs by examining their associations with both environmental and financial performance. While this study is unable to assert causality, the findings provide an important insight into the need to integrate EMSs and EMA practices, specifically EAM. In addition, the findings provide an initial insight into the relationship between the extent of use of these practices and organisational performance (environmental and financial). Design/methodology/approach Data was collected using a mail survey of 659 manufacturing organisations identified from the Onesource on-line database. A total of 140 completed questionnaires were returned (21.2%), 72 (10.9%) following the initial mail-out, and a further 68 (10.3%) from the follow-up mail-out. Findings In respect to the association between EAM and EMSs, this study provides empirical evidence to support the integration of EAM practices with the use of EMSs, suggesting the relationships between the two is bi-directional. In respect to the association between EMSs with environmental and financial performance, while the extent of use of EMSs is not associated with financial performance, there is strong evidence supporting the positive association between EMSs with environmental performance. Further, while there are minimal results regarding the direct association between the three EAM practices and environmental performance, a cyclical relationship between EAM and financial performance is identified. Originality/value This study contributes to the literature by providing an empirical insight into the relationship between the extent of adoption of EMSs and the use of EMA. The focus on the relationship between EMSs and EMA is pertinent owing to the sparse research on EMA practices and the “importance of using such [EAM] practices and integrating them within the organisation rather than using them on an ad hoc basis” (Phan et al., 2018, p. 657). This study also contributes to the literature by examining the effectiveness of both practices in respect to their association with environmental and financial performance.

Exploring relationship between sustainability and firm performance in travel and tourism industry: a global evidence

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Shernaz Bodhanwala ◽  
Ruzbeh Bodhanwala
Keyword(s):  
Stock Market ◽  
Financial Performance ◽  
Market Value ◽  
Tourism Industry ◽  
Content Type ◽  
Sustainability Performance ◽  
Travel And Tourism ◽  
Stock Market Performance ◽  
The Impact ◽  
The Relationship

Purpose The study aims to investigate the relationship between aggregate and individual dimensions of sustainability and financial and stock market performances of the firms in the travel and tourism industry (TTI) across different geographies. Design/methodology/approach The sample under study consists of 146 firms belonging to TTI that have consistently obtained environmental, social and governance (ESG) rating over the period 2011–2017 as a part of Thomson Reuters Asset 4 ESG database. An empirical multivariate panel data model is developed to analyse the impact of sustainability (ESG) on firm profitability and market value within three tourism-related industries (transportation, hotel and leisure). Findings The study extends the existing literature by investigating the impact of each of the vital dimensions of sustainability performance – ESG – and examines how each dimension would affect financial performance and market value among firms within three tourism-related industries (transportation, hotel and leisure). Among the three tourism industries, hotel industry is observed to have the highest ESG compliance, followed by the transportation industry. Based on the agency and stakeholder theory, the authors hypothesized all ESG components to have significant positive effect on the financial and stock market performance; however, the results reveal that each dimension has different impact on financial performance and market value of firms in the tourism industry. Research limitations/implications The study could help firms in the travel and tourism industries to understand which of the dimension of ESG activities is significantly important for their financial and stock market performance. Originality/value The unique contribution of this study is that it considers wider definition of the term “Sustainability” and examines the relationship between financial and stock market performances of the firms and each component of ESG. This is one of the few studies at the global level that provides much needed evidence in the area of sustainability performance by the travel and tourism firms.

The relationship between intellectual capital, firms’ market value and financial performance

2015 ◽  
Vol 16 (3) ◽  
pp. 587-618 ◽  
Author(s):  
Sirinuch Nimtrakoon
Keyword(s):  
Financial Performance ◽  
Intellectual Capital ◽  
Positive Relationship ◽  
Value Added ◽  
Market Value ◽  
Relational Capital ◽  
Content Type ◽  
Capital Efficiency ◽  
Asean Countries ◽  
The Relationship

Purpose – The purpose of this paper is to explore and compare the extent of intellectual capital (IC) and its four components among ASEAN countries, and examine the relationship between firms’ IC, market value, and financial performance. Design/methodology/approach – The study uses the data of 213 technology firms listed on five ASEAN stock exchanges. Pulic’s Value Added Intellectual Coefficient model is modified by adding an extra component, namely, relational capital efficiency (RCE). The Kruskal-Wallis one-way ANOVA and multiple regression analysis have been utilized to test the hypotheses. Findings – The results reveal that there is no significant difference in Modified Value Added Intellectual Coefficient (MVAIC) across five ASEAN countries; however, firms in each country tend to place a different degree of emphasis on components of MVAIC to generate corporate value. The results further indicate a positive relationship between IC and market value, confirming that firms with greater IC tend to have greater market value. Likewise, a positive relationship between IC and financial performance measures is confirmed. Specifically, IC is found to be positively associated with margin ratio and return on assets. Capital employed efficiency and human capital efficiency are found to be the most influential value drivers for both market value and financial performance while structural capital efficiency and relational capital efficiency possess less importance. Originality/value – This study contributes to the IC literature by expanding our knowledge of IC in the emerging economies, and providing a national comparative IC research when such research is limited.

Corporate social responsibility and market value: evidence from Jordan

2016 ◽  
Vol 14 (1) ◽  
pp. 2-29 ◽  
Author(s):  
Bilal Fayiz Omar ◽  
Nidal Omar Zallom
Keyword(s):  
Regression Analysis ◽  
Human Resources ◽  
Financial Performance ◽  
Market Value ◽  
Content Type ◽  
Industrial Sectors ◽  
Food And Beverage ◽  
Corporate Social ◽  
The Relationship ◽  
Practical Implications

Purpose This study aims to investigate the relationship between different themes of corporate social responsibility (CSR) and companies’ market value (measured by Tobin Q) for Jordanian firms listed on the Amman Stock Exchange (ASE) for the period 2006-2010. Design/methodology/approach The annual reports of 26 companies on the ASE for the years 2006-2010 were selected for this study. Three industrial sectors were chosen: chemical; food and beverage; and pharmaceutical and medical (P&M). The CSR is measured by constructing an index consisting of four themes which are as follows: environmental 9 items; human resources 16 items; community 7 items; and products 7 items. The study adopts Tobin Q as the dependent variable to measure the market value of corporations. Two control variables were included in the regression analysis for their possible effects on the CSR and company’s market value relationship: size and leverage. This study performs a multiple regression analysis model to test the effect of the four CSR themes: environmental, human resources, community and products on the market value measured by Tobin Q. Findings The results revealed that environmental, community and product activities decreased market value in the food and beverage industry, while human resources activities had no effect on market value in the same industry. Moreover, the community theme was found to have a negative effect on market value in the P&M industry, while the three other themes were found to have no effect on market value in the same industry. The four themes had no effect on market value in the chemical industry. Research limitations/implications The current study has a number of limitations, which have implications for future research. First, the study focused only on three industrial sectors (chemical, food and beverage and P&M), which limited the results to only these industries. In addition, the CSR concept and its effect on profitability is an important issue for the financial and services sectors. Hence, it would be beneficial to investigate the CSR impact on profitability for the financial and services sectors. Moreover, the study focused only on one country, Jordan. An extension of this study could be a comparison of the CSR effect on financial performance between Jordan and other countries in the Middle East. Furthermore, the measurement of CSR is subject to criticism because it might generate bias according to subjective judgments about CSR items. The CSR items are equally weighted, which might not be acceptable because their nature and effect differ among industries. However, introducing qualitative measures for CSR that reflect various perspectives about CSR practices and implications is essential. Finally, the period chosen for this study includes the years of global financial crisis as well which had eroded the market value of many firms in different industries, and this may form a prominent limitation of this study. Practical implications The results of this study have given evidence of the role of CSR in Jordan. The investments in the CSR field could negatively affect or could have no effect on market value. Overall, regulators in Jordan should pay attention to the costs and benefits of CSR among companies. Companies will be encouraged to invest in CSR activities if the benefits on their financial performance exceed the costs (cost-benefit theory). Specifically, companies should select types of CSR activities that enhance their competiveness in the society. Social implications The results of this study provide practical implications to several users in the chemical, food and beverage and P&M industries. Managers, investors and other users may pay attention to the impact of CSR strategies on the company’s market value. For example, food and beverage managers may decrease their CSR investments around environmental, community and product activities because these decrease the market value and profitability of the company. However, the CSR investment in human resources does not affect the profitability in this industry. For the chemical industry, managers may not focus on CSR investments in the different activities (environmental, human resources, community and products) because these have no impact on the company’s market value. In regards to the P&M industry, managers may decrease their CSR investments around community activities because this decreases the market value. However, managers may not be concerned with CSR investments in environmental, human resources and products activities because these do not affect the company’s market value. Originality/value The relationship between CSR and a company’s financial performance has been tested broadly in the financial and management fields without any conclusive results. Some explanations for the inconclusive results are discussed. Inoue and Lee (2011, p. 791) noted three main issues that remain unresolved in the studies regarding the relationship between CSR and a company’s performance: using samples for different industries, using cross sectional observations and using aggregate CSR dimensions. The current study overcomes the main problems in the previous discussion. In particular, the study will focus on specific industries (chemical, food and beverage and P&M). In addition, the study will use multidimensional CSR measures. Moreover, financial performance will be measured by a single measure (market value) instead of using different measures of financial performance.

A European empirical study of the relationship between firms’ intellectual capital, financial performance and market value

2017 ◽  
Vol 18 (4) ◽  
pp. 771-788 ◽  
Author(s):  
Filipe Sardo ◽  
Zélia Serrasqueiro
Keyword(s):  
Financial Performance ◽  
Intellectual Capital ◽  
Western Europe ◽  
Market Value ◽  
Content Type ◽  
Large Sample ◽  
Explanatory Variables ◽  
Long Run ◽  
The Impact ◽  
The Relationship

Purpose The purpose of this paper is to analyze the relationship between firms’ intellectual capital (IC), financial performance (FP) and market value (MV) as well as the relationship between ownership concentrations on IC performance. Design/methodology/approach A large sample of non-financial listed firms belonging to 14 countries in Western Europe, for the period between 2004 and 2015, was investigated using the GMM system (1998) dynamic estimator and the effect of lagged explanatory variables on firm’s FP and MV. Findings The results reveal that IC is an important resource for firms’ value creation. Human capital is found to be a key factor of firms’ wealth. Results show that capital employed efficiency positively impacts on firms’ FP in the short run. The impact of IC components on firms’ MV may not be immediate. The structural capital positively affects firms’ FP in the long run. Also, the results reveal that ownership concentration and owners’ management involvement constrain firms’ IC performance. Originality/value The current study contributes to IC research by exploring a large sample of firms across countries in Western Europe using econometric modeling. Considering that the effect of IC on firms’ FP needs time to be realized, thus to be measured, the effect of lagged explanatory variables on performance was tested, using dynamic panel estimators, specifically the GMM system (1998) dynamic estimator.

Determining the managerial perception on triple bottom line performance

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Parul Munjal ◽  
Deergha Sharma
Keyword(s):  
Financial Performance ◽  
Environmental Performance ◽  
Banking Industry ◽  
Socially Responsible ◽  
Bottom Line ◽  
Content Type ◽  
Bank Managers ◽  
Managerial Perception ◽  
Social And Environmental Performance ◽  
The Relationship

Purpose The purpose of this paper is to determine managerial perception on social and environmental performance and its effect on financial performance in the Indian banking industry. In addition, the study tests moderating role of gender and experience of bank managers in influencing the association between the constructs. Design/methodology/approach The empirical study is conducted using survey methodology. Responses were collected from 182 bank managers covering the private sector, public sector, foreign, regional rural and cooperative banks. Structural equation modelling technique was used to test hypothesized relationships between the constructs using Smart partial least squares software (3.3.2 version). Findings Results of the study endorse the stakeholder perspective. Bank managers perceive that involvement in socially responsible practices strengthens the relationship between stakeholders and banks, which eventually improves financial performance. Conversely, results indicate that environmental practices by banks do not influence financial performance, thereby sustaining shareholder perspective. Further, results suggest that gender and experience of bank managers are not effective moderators in determining the relationship between the constructs. Practical implications Findings would be valuable for investors to better assimilate social and environmental performance along with its effect on the financial performance of banks. The study would also facilitate policymakers and regulators to outline pertinent policies and rules to uphold financial strength and integrity in the banking industry. Further, bank managers’ perception would have a marked influence on customers’ understanding of social and environmental activities that might shape customer satisfaction, trust, engagement and loyalty. Originality/value The study underscores the eminence of endorsing socially responsible practices in the banks. This would facilitate in improving the sustainability in the Indian banking industry.

Doing well by doing good: can voluntary CSR reporting enhance financial performance?

2019 ◽  
Vol 11 (2) ◽  
pp. 100-119 ◽  
Author(s):  
Avinandan Mukherjee ◽  
Rosita Nuñez
Keyword(s):  
Financial Performance ◽  
Performance Measures ◽  
Environmental Risk ◽  
Significant Relationship ◽  
Content Type ◽  
Csr Reporting ◽  
Financial Performance Measures ◽  
The Relationship ◽  
Risk Ratios ◽  
Do So

Purpose Management is sometimes challenged by investors to justify the financial benefits of voluntary disclosure and transparency related to corporate social responsibility (CSR). Researchers have found inconsistent results when examining the relationship between CSR reporting and financial performance. The purpose of this paper is to explore the relationship between voluntary CSR reporting and financial performance. Specifically, this paper addresses three questions. First, is there a significant difference in Global Reporting Initiative (GRI) reporting level for firms in a high environmental risk sector compared to those in a low environmental risk sector? Second, does GRI reporting level significantly influence financial performance measures, such as the risk ratios and information ratio? And third, does the relationship between GRI reporting level and financial performance measures differ significantly based on sector environmental risk? These questions are particularly relevant to the Indian business environment, where CSR is not just voluntary but mandated by regulation since 2013. The Indian Government is the first to do so and is ahead of many nations in collaborating with businesses to address not just environmental impacts but also social effects of industry on the community. Design/methodology/approach This study examined the relationship between GRI reporting level and financial performance for 173 firms with different levels of environmental risk. ANOVA and MANOVA were used to examine for differences in GRI reporting level and financial performance for firms from the various sectors and also to determine if there were significant relationships between GRI level and certain financial risk ratios. Findings Results indicate that firms in sectors with high environmental risk adopt GRI framework at a higher level than firms with low environmental risk. There is no significant relationship found between GRI reporting and financial performance at an aggregate level. However, environmental risk is found to moderate the relationship between GRI reporting and financial reporting, such that firms with high risk experience a more significant relationship between the GRI level that is adopted and financial performance. Originality/value CSR is quickly becoming a pathway to sustainable competitive advantage for businesses today. Such CSR efforts can lead to both reputational and financial performance implications. Organizations not only adopt CSR in response to regulatory requirements, but also frequently do so voluntarily to address stakeholder concerns. This study sheds valuable insight on the positive effects of CSR reporting, which provides important implications for Indian organizations.

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