Influence of external factors on environmental practices for corporate sustainability

Abstract

This dissertation analyzes the influence of external factors in the implementation of corporate environmental responsibility (CER) for corporate sustainability. The thesis consists of three essays that investigate (i) the effect of product market competition on CER and examine the moderating role of managerial competency for firms’ environmental strategy

(ii) the competent managers’ perception on CER and the moderating effect of local religiosity on the association

and (iii) the impact of local religiosity on corporate financial policy and CER strategies. The first essay studies the influence of product market competition and the role of managerial competency in enhancing firm performance. We find that product market competition tends to discourage firms from addressing environmental challenges. However, competent managers play a positive moderating role in enhancing CER practices in competition, demonstrating an increase in profitability. Moreover, our results show that a well-performing firm exhibits significant gains in profitability by intensifying CER practices. The second essay explores the influence of local religious risk-taking attitudes to evaluate the motives of competent managers, altruistic or strategic, to engage in CER activities. We find competent managers show a higher strategic preference for environmental activities when faced with risk. Further results indicate that CER positively influences firms’ financial performance outcomes in high risk-taking states. The third essay analyzes the effect of CER on corporate financial policy. The results indicate that CER practices significantly attenuate the demand for precautionary cash reserves to protect the firm from unforeseeable risk. In addition, our findings show that environmentally conscious firms in the high risk-taking area not only gain financial stability but also improve their profitability. The thesis contributes to the literature on risk management by validating managers’ perception of the strategic value of CER practices that mitigate external risk and provides useful insights for policymakers and corporates to strategically improve environmental protection.