Environmental Responsibility and Firm Performance: The Application of an Environmental, Social and Governance Model

Lee, Ki‐Hoon; Cin, Beom Cheol; Lee, Eui Young

Abstract

This paper investigates the way in which environmental responsibility impacts on corporate financial performance, measured by return on equity (ROE) and return on assets (ROA). Using a sample of Korean firms covering the period 2011–2012, and employing two different test methods, namely the OLS and 2SLS methods, we show that the relationships between environmental responsibility performance and firms’ ROE and ROA are positive and statistically significant. However, we show that research and development (R&D) intensity (expenditure) does not affect either environmental responsibility or corporate financial performance. The results of this analysis encourage further empirical analysis of the industries, as well as the use of more than one estimation method to determine environmental responsibility and corporate financial performance within firms.

Citation

Lee, K., Cin, B. C., & Lee, E. Y. (2016). Environmental Responsibility and Firm Performance: The Application of an Environmental, Social and Governance Model. Business Strategy and the Environment, 25(1), 40-53. https://doi.org/10.1002/bse.1855

• Journal Article Type: Article
• Acceptance Date: Apr 2, 2014
• Online Publication Date: May 19, 2014
• Publication Date: 2016-01
• Deposit Date: Apr 18, 2024
• Journal: Business Strategy and the Environment
• Print ISSN: 0964-4733
• Electronic ISSN: 1099-0836
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• Volume: 25
• Issue: 1
• Pages: 40-53
• DOI: https://doi.org/10.1002/bse.1855
• Keywords: environmental responsibility, ESG, ROE, ROA, financial performance, sustainable development, Korean firms
• Public URL: http://researchrepository.napier.ac.uk/Output/3596242