Economic Development Matters: A Meta‐Regression Analysis on the Relation between Environmental Management and Financial Performance

Abstract

Although the existing body of empirical literature on the relation between corporate environmental performance (CEP) and corporate financial performance (CFP) is continuously growing, results are still inconclusive about this fundamental question in industrial ecology. Comparisons are difficult because of various estimation methods as well as the overall heterogeneous and complex interaction between the two constructs, but especially because of country-specific data sets. Consequently, we raise the question of whether regional differences are the driving force buried underneath the inconclusiveness. Therefore, the aim of this article is to explore this heterogeneity by aggregating 893 existing results from 142 empirical primary studies that are based on more than 750,000 firm-year observations. Our findings suggest a convex impact of a country's economic development on the magnitude of the CEP-CFP effect (i.e., the effect is positive in developing countries, disappears in emerging countries, and is again positive in highly developed countries). We also find that the overall positive relation strengthens for market-based CFP measures and diminishes for countries with civil law systems, firms from the service sector, reactive environmental activities, and process-based CEP measures. Further, several aspects of the examined data sample and the inclusion of relevant control variables explain heterogeneity in previous research results. Keywords:corporate environmental performance (CEP) corporate financial performance (CFP) heterogeneity industrial ecology meta-analysis moderating effectsSupporting information is linked to this article on the JIE website Over the past 40 years, hundreds of studies have found evidence for a positive relationship between corporate environmental performance (CEP) and corporate financial performance (CFP). However, empirical results largely vary because of differences in their variable measures, sample compositions, Conflict of interest statement:The authors have no conflict to declare.

It is merely a matter of time: A meta‐analysis of the causality between environmental performance and financial performance

“…Extending existing meta‐studies on the relation between CEP and CFP (Albertini, ; Dixon‐Fowler et al, ; Endrikat et al, ; Guenther et al, ; Hang et al, ; Horváthová, ), the aim of this paper is to shed light on the reverse causality between both constructs by applying meta‐analysis on a sample of 893 effect sizes.…”

“…Due to these aspects, academics often refer to this bivariate relation as an overall heterogeneous and complex interaction (Endrikat, Guenther, & Hoppe, ; Guenther & Hoppe, ). Although literature provides a vast number of comprehensive and meaningful primary studies (among others, Hart & Ahuja, ; King & Lenox, ; Konar & Cohen, ; Russo & Fouts, ; Tang, Walsh, Lerner, Fitza, & Li, ) and meta‐analyses (among others, Albertini, ; Endrikat et al, ; Guenther, Hoppe, & Endrikat, ; Hang, Geyer‐Klingeberg, Rathgeber, & Stöckl, ), the discussion of the causality is largely fragmented. Besides the prevalent mixed empirical evidence, existing primary studies are strongly characterized by their heterogeneous study designs, which hampers comparison.…”

What do we really know about corporate hedging? A meta-analytical study

“…Consequently, we analyze and control for systematic differences in the reported effect sizes via multiple meta-regression analysis following recent publications in economics and finance (among others, Carney et al 2011;Feld et al 2013;Hang et al 2017;Havranek and Irsova 2011). This step should serve as a verification that the aggregation of reported results in the multivariate meta-analysis is appropriate.…”

Impacts of Industrial Heterogeneity and Technical Innovation on the Relationship between Environmental Performance and Financial Performance

“…Apart from the widely used linear models, some scholars also use meta-analysis to study the focal link and indicate the overall positive link (e.g., [7,13,22,24,43,44]). A detailed literature review on meta-analysis is provided by Hang et al [10].…”

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