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Carbon Emissions Reduction and Corporate Financial Performance: The Influence of Country-Level Characteristics

Author

Listed:
  • Robin van Emous

    (Department of Economics, Econometrics and Finance, Faculty of Economics and Business, University of Groningen, 9747 AE Groningen, The Netherlands)

  • Rytis Krušinskas

    (School of Economics and Business, Kaunas University of Technology, LT-44029 Kaunas, Lithuania)

  • Wim Westerman

    (Department of Economics, Econometrics and Finance, Faculty of Economics and Business, University of Groningen, 9747 AE Groningen, The Netherlands)

Abstract
Using a cross-country dataset covering 9265 observations on 1785 firms representing 53 countries over the period 2004–2019, this study investigates the relation between carbon emissions reduction and corporate financial performance (CFP). We perform OLS regressions with fixed effects. We found that carbon emissions reduction increases the return on assets, the return on equity, and the return on sales, whereas it has no effect on the Tobin’s Q and the current ratio. The positive relationship with the return on assets is stronger for firms with a higher responsibility score. We study country characteristics by modeling GDP growth, overall emissions within a country, and the presence of carbon emissions legislation. Our results indicate that the overall carbon emissions of a country and the presence of carbon emissions legislation are related to both corporate carbon emissions reduction and CFP. Moderating effects of the country’s overall emissions and the presence of carbon emissions legislation do not affect the relationship between carbon emissions reduction and CFP. Despite the further understanding gained, the issue of whether it “pays to be green” can still not be resolved well.

Suggested Citation

  • Robin van Emous & Rytis Krušinskas & Wim Westerman, 2021. "Carbon Emissions Reduction and Corporate Financial Performance: The Influence of Country-Level Characteristics," Energies, MDPI, vol. 14(19), pages 1-19, September.
    • Handle: RePEc:gam:jeners:v:14:y:2021:i:19:p:6029-:d:640665
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    References listed on IDEAS

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    Cited by:

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    5. Lan, Bingying & Dong, Ke & Li, Li & Lei, Yalin & Wu, Sanmang & Hua, Ershi & Sun, Ruyi, 2023. "CO2 emission reduction pathways of iron and steel industry in Shandong based on CO2 emission equity and efficiency," Resources Policy, Elsevier, vol. 81(C).

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