Corporate Environmental Responsibility and Firm Performance in the Financial Services Sector

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In this study, we examine whether corporate environmental responsibility (CER) plays a role in enhancing operating performance in the financial services sector. Because achieving success with CER investing is often a long-term process, we maintain that by effectively investing in CER, executives can decrease their firms' environmental costs, thereby enhancing operating performance. By employing a unique environmental dataset covering 29 countries, we find that the reducing of environmental costs takes at least 1 or 2 years before enhancing return on assets. We also find that reducing environmental costs has a more immediate and substantial effect on the performance of financial services firms in well-developed financial markets than in less-developed financial markets. These results are economically and statistically significant and robust even after alleviating endogeneity and using an additional performance measure. We interpret our empirical results as supporting the social impact and reputation-building hypothesis. Our findings also suggest that policy makers dealing with corporate sustainability management should pursue an environment-centered industry policy not only at the manufacturing sector but also at the financial services sector, as firms in both sectors with lower environmental costs perform better.
Publisher
SPRINGER
Issue Date
2015-10
Language
English
Article Type
Article
Keywords

SOCIAL-RESPONSIBILITY; BANKING INDUSTRY; NONFINANCIAL DISCLOSURE; BUSINESS ETHICS; MARKET VALUE; PANEL-DATA; BEHAVIOR; LINK; ATTRACTIVENESS; PERSPECTIVE

Citation

JOURNAL OF BUSINESS ETHICS, v.131, no.2, pp.257 - 284

ISSN
0167-4544
DOI
10.1007/s10551-014-2276-7
URI
http://hdl.handle.net/10203/205233
Appears in Collection
MT-Journal Papers(저널논문)
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