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Carbon performance versus financial performance

Author

Listed:
  • Yu He
  • Qingliang Tang
  • Kaitian Wang
Abstract
Extant literature has failed to document consistent evidence that socially responsible activities are positively related to financial performance. Such an inconclusive result raises the question of identifying the incentive for firms to voluntarily commit resources for carbon mitigation. Our study attempts to address this issue by investigating the relation between carbon performance and financial performance. We employ a sample of US S&P 500 corporations and use emissions reduction to measure carbon performance and Tobin’s Q to measure financial performance. In order to mitigate the concern of endogeneity, we also consider the influence of carbon disclosure on the relation by conducting simultaneous equations analysis. The results show a positive relation between carbon performance and financial performance. In addition, we find firms with better financial performance tend to be more transparent in carbon disclosure. These findings contrast with previous studies that typically report mixed results. A higher degree of correspondence between carbon performance and financial performance indicates managers who have financial and social obligations and who have chosen carbon projects that have not only improved firm green image but have also generated tangible economic benefit.

Suggested Citation

  • Yu He & Qingliang Tang & Kaitian Wang, 2016. "Carbon performance versus financial performance," China Journal of Accounting Studies, Taylor & Francis Journals, vol. 4(4), pages 357-378, October.
    • Handle: RePEc:taf:rcjaxx:v:4:y:2016:i:4:p:357-378
    DOI: 10.1080/21697213.2016.1251768
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    Cited by:

    1. Maruli Sitompul & Arif Imam Suroso & Ujang Sumarwan & Nimmi Zulbainarni, 2023. "Revisiting the Impact of Corporate Carbon Management Strategies on Corporate Financial Performance: A Systematic Literature Review," Economies, MDPI, vol. 11(6), pages 1-21, June.
    2. Isibor Areghan Akhanolu & Ehikioya Benjamin & Mercy Adebayo & Awogbenja Bukola Bolanle & Adedoyin Bunmi-Alo, 2023. "Carbon Disclosure, Board Climate Governance and Financial Performance of Listed Manufacturing Firms in Nigeria," International Journal of Energy Economics and Policy, Econjournals, vol. 13(4), pages 187-193, July.
    3. Luo, Shunjun & Liang, Junfen, 2023. "Green economic recovery hindered by increased carbon intensity: Evidence from China," Resources Policy, Elsevier, vol. 86(PB).
    4. Saleh F.A. Khatib & Hamzeh Al Amosh, 2024. "Corporate Governance, Management Environmental Training, and Carbon Performance: The UK Evidence," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(3), pages 14787-14809, September.

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