Environmental and financial performance in the European manufacturing sector: an analysis of extreme tail dependency

Tzouvanas, Panagiotis, Renatas, Kizys, Ioannis, Chatziantoniou and Roza, Sagitova (2019) Environmental and financial performance in the European manufacturing sector: an analysis of extreme tail dependency. British Accounting Review. ISSN 0890-8389

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Abstract

In this study, we investigate the impact of environmental performance on financial performance. We argue that environmental performance heterogeneously affects firms with different profitability level. Using data for 288 European manufacturing firms over the period 2005-2016, we investigate the said relationship under the financial slack argument and the contrasting paradigms of neoclassical and the instrumental stakeholder theory. Employing a quantile regression framework enriched with a set of instrumental variables to more effectively approximate environmental performance, we find (i) firms with superior environmental performance tend to be more profitable; (ii) the relationship between environmental and financial performance can be characterised as positive and heterogeneous across the conditional distribution; (iii) financial and environmental performance are endogenously related only when high profitability firms are examined.

Item Type: Article
Keywords: Financial Performance, Environmental Performance, Quantile regressions
Schools and Departments: University of Sussex Business School > Accounting and Finance
Depositing User: Panagiotis Tzouvanas
Date Deposited: 28 Oct 2019 12:01
Last Modified: 29 Oct 2019 14:00
URI: http://sro.sussex.ac.uk/id/eprint/87470

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