Environmental proactivism and firm performance: evidence from security analyst earnings forecasts

Abstract

There is an ongoing debate over the impact of corporate pro-environment actions and strategies (reflected, for example, in pollution prevention and emission reductions, product re-design, materials stewardship) on corporate financial performance in US corporations today. A review of the existing literature in this area yields no consistent pattern of relationships between corporate environmental proactivism and financial performance when historical corporate accounting performance and stock market measures of performance are used. We revisit this relationship using a novel measure of firm performance: security analyst earnings forecasts. Specifically, we demonstrate a significant, negative relationship between environmental proactivism (using Toxic Release Inventory data) and industry analyst 1-and 5-year earnings-per-share performance forecasts for a sample of 523 US firms in 1992. We discuss the implications of these findings and provide suggestions for future research.

The Impact of Environmental Improvements on the Financial Performance of Leading Companies Listed in Bursa Malaysia

“…It stated that there would be an increase in corporate ROA and ROE after efforts to prevent pollution through emissions reduction within one to two years of initiation. A negative relationship between the emission index and financial performance was also found in studies by [23], [24]. However, our findings were consistent with those of a study by [26], where no significant relationship between emissions and financial performance was found.…”

“…Reference [23] suggested that there is a negative link between environmental performance and financial performance. Their study focused on 13 firms in the US pulp and paper sector and used data from 1978.…”

Environmental Performance and Financing Decisions Impact on Sustainable Financial Development of Chinese Environmental Protection Enterprises

“…As we know, the type and the amount of the environmental protection investment must be approved by the government and the firm [53]. In addition, a higher growth rate indicates better environmental performance [54,55]. Thus, growth rate of environmental protection investment reflects environmental performance.…”

Understanding Complexity: the Curvilinear Relationship Between Environmental Performance and Firm Performance

“…The following studies reported negative relationships: Brammer et al (2006), Cordeiro and Sarkis (1997), Dobre et al (2015), Filbeck and Gorman (2004), Konar and Cohen (2001), Moore (2001), Cordeiro (2001), andLima Crisóstomo et al (2011). A main argument for the existence of negative relationship is that firms trying to enhance EP draw resources and management effort away from core areas of the business, resulting in lower profits.…”