The determinants of environmental performance and its effect on the financial performance of European-listed companies

Abstract

This study seeks to identify the factors that can simultaneously improve the environmental and financial performance of a company and determine if an improvement in the environmental performance of a company is accompanied by an improvement in its financial performance. We estimate a system of structural equations using the partial least squares approach applied to data on 351 large European-registered companies extracted from the ASSET4-Environmental, Social, and Governance database for the 2007–2015 period. The results show that the engagement of a company in environmental protection is significantly affected by the system of governance of the company and the availability of financial resources at the 1 and 5% levels, respectively. The results also show that engaging in environmental protection increases the accounting and stock exchange performance of companies. These results thus suggest that the protection of the ecosystem by companies leads to a paradigm, which can form the basis of a model of responsible governance whose goal is to create value while respecting environmental factors.

Does environmental, social and governance (ESG) affect market performance? The moderating role of competitive advantage

“…Besides, the proponents of the legitimacy theory explain that ESG actions may be considered a company’s intention to achieve moral legitimacy concerning the social contract (Lokuwaduge and Heenetigala, 2016; Baldini et al , 2016; Silva, 2021; Ellram et al , 2022; Alda, 2021). Many studies conclude that a company’s financial performance can be improved by enhancing its legitimacy (Acquah et al , 2021; Wamba, 2021). In this context, the academic literature has recognized that organizations make significant steps to integrate ESG into their operations and strategy (Lim et al , 2022; Alkaraan et al , 2022).…”

Environmental protection and sustainable development of enterprises in China: The moderating role of media attention

“…If companies do not want to be overwhelmed and eliminated in the fiercely competitive market environment, they should follow the global trend of green development and develop a quality certification system aligned with international standards to regulate and adjust their industrial structure, optimize human resources, improve technological content, reduce resource consumption and environmental pollution, as a responsible enterprise (Ahmed and Streimikiene, 2021). Environmental protection is beneficial for enterprises to improve the utilization rate of enterprise resources, win more market and social resources, establish a good social image, gain competitive advantage, and achieve sustainable development (Wamba, 2022). Taylor et al (2018) concluded that the fulfillment of environmental responsibility may sacrifice certain economic benefits in the short term, but it guarantees sustainable development in the long term.…”

Environmental performance and financial performance: Empirical evidence from Indonesian companies

“…The increasing number of environmental problems has attracted researchers to examine the relationship of these issues to business practices. However, the previous studies are more interested in environmental disclosure (Iatridis, 2013; Wamba, 2021; Wu et al, 2020; Lee, 2017; Samaha et al, 2015). Previous research has contributed to the importance of studying environmental issues but neglecting the determinants of environmental performance, including the role of government regulation.…”