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

Panagiotis Tzouvanas, Renatas Kizys, Ioannis Chatziantoniou, Roza Sagitova

Research output: Contribution to journalArticlepeer-review

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.
Original languageEnglish
Article number100863
Pages (from-to)1-21
Number of pages21
JournalThe British Accounting Review
Volume52
Issue number6
Early online date24 Oct 2019
DOIs
Publication statusPublished - 1 Nov 2020

Keywords

  • Financial performance
  • Environmental performance
  • Quantile regressions

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