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

Abstract

Research on the relationship between corporate environmental performance (CEP) and financial performance (CFP) continuously receives high attention in both general media and academic publications. One central issue concerns the causal effects between the two constructs. Because existing primary literature is characterized by its heterogeneous study designs and mixed empirical evidence, the aim of this paper is to explicitly shed light on the causality effects between CEP and CFP by means of a meta-analysis of 893 empirical estimates from 142 CEP-CFP studies. Our findings suggest that in the short run (1 year), financial resources can increase a firm's environmental performance as proposed by the slack resources hypothesis; however, the effects disappear in the long run (after more than 1 year). Conversely, increasing environmental performance has no short-term effect on a corporate financial performance, whereas a firm significantly benefits in the long term, which is in accordance with the Porter hypothesis. Overall, our results show that the causality between environmental performance and financial performance depends on the time horizon.

Sustainability and financial performance of small and medium sized enterprises: A bibliometric and systematic literature review

“…Because the topic has been studied only recently by scholars, there is a large space for future research. In particular, considering the recent European Union environmental strategies, particularly focused on the implementation of sustainable and circular economy (European Commission, , ), the relation between companies' environmental and financial performance should be deepened, as firms can operate and produce goods and services respecting the circular economy principles only when sustainable from an financial point of view and, therefore, profitable (Bartolacci et al, ; Hang, Geyer‐Klingeberg, & Rathgeber, ).…”

Board gender diversity and environmental performance: An industries perspective

“…Unlike the conflicting link between gender diversity and firms' financial performance (Bøhren & Strøm, ; Hang, Geyer‐Klingeberg, & Rathgeber, ; Joecks, Pull, & Vetter, ; Johnson, Schnatterly, & Hill, ; Trumpp & Guenther, ), most of the studies that investigated gender diversity and some aspect of corporate social responsibility or environmental disclosure have found a positive relationship. Studies have used the following dependent variables: socially responsible or social performance classification (Bear, Rahman, & Post, ; Boulouta, ; Hafsi & Turgut, ; Setó‐Pamies, ; Siciliano, ; Stanwick & Stanwick, ; Webb, ; Zhang, Zhu, & Ding, ); both social and environmental disclosure (Galbreath, ) and environmental disclosure in the annual report (Rao, Tilt, & Lester, ); corporate social responsibility reporting (Jizi, ); the Carbon Disclosure Project disclosure decision of carbon or greenhouse gas emissions (Ben‐Amar, Chang, & McIlkenny, ); and charitable contributions (Coffey & Wang, ; Wang & Coffey, ; Williams, ).…”

Understanding variation in the relationship between environmental management practices and firm performance across studies: A meta‐analytic review

“…More and more firms are adopting environmental management practices (EMPs) to reduce their environmental impact and to create competitive advantages (Bansal & Roth, 2000). The relationship between EMPs and firm performance has been the subject of ongoing attention from academic researchers (Hang, Geyer-Klingeberg, & Rathgeber, 2019;Zubeltzu-Jaka, Erauskin-Tolosa, & Heras-Saizarbitoria, 2018). However, studies that examine the link between the two have different research characteristics and present mixed empirical evidence.…”