The European Union’s Environmental Policy and Long-Term Investments of Enterprises

Abstract

Purpose: Current European Union efforts are focused on creating regulations that are conducive to long-term investor commitment, i.e. they are fighting short-termism on financial markets. Enterprises that implement the European Union's environmental policy are seen to engage long-term financial resources, which should therefore dominate the structure of their assets. The primary goal of the paper is to ascertain whether a company's high environmental performance (E-index) is positively correlated with the value of its long-term investments. Design/Methodology/Approach: The empirical research is carried out in two parts. The first part presents the correlation between the company's E-index and the share of its long-term investments in total assets. For comparison, we examine these relationships with ESG, as well as the S and G scores. In the second part, we assess the character and strength of the impact of the company's E-index on the value of its long-term investments. This study includes companies listed on 14 Western European stock exchanges, covering the period 2002 to 2019. Findings: Contrary to our assumptions, we find, first, that the environmental index is negatively related to the share of long-term investments in assets in most countries. Second, using panel dataset for the analysed European Union markets, we find evidence that the environmental index negatively affects the value of long-term investments, indicating that the current actions undertaken by the European Union have no empirical justification. Practical Implications: The results of the research may be useful for researchers, practitioners, and regulators from the European Union and the European Union countries in understanding the relationship between a company's E-index and its investments. Originality/Value: There is no research which proves that the increase in long-term investments, and thus the increase in the availability of long-term capital, is of key importance for enterprises, so our research is pioneering and unique.

How green credit policy shapes financial performance: Evidence from Chinese listed construction energy-saving enterprise

“…The ROTA has been used extensively in previous studies (Binti Mohamad et al, 2017;Nguyen et al, 2021), and represents the ratio of total net profit to average total assets. It is primarily used to measure an enterprise's ability to earn profits from its assets by reflecting the efficiency of utilizing total assets (Janicka and Sajnog, 2021). The higher this ratio is, the more profitable the total assets are (Janicka and Sajnog, 2021).…”

“…It is primarily used to measure an enterprise's ability to earn profits from its assets by reflecting the efficiency of utilizing total assets (Janicka and Sajnog, 2021). The higher this ratio is, the more profitable the total assets are (Janicka and Sajnog, 2021). In addition, the classification of the enterprise is based on fixed assets, which rely more on accounts payable that finance their total turnover.…”