Environmental and financial performance in the European manufacturing sector: An analysis of extreme tail dependency |
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| Institution: | 1. University of Sussex, University of Sussex Business School, United Kingdom;2. University of Portsmouth, Faculty of Business and Law, United Kingdom;3. University of Southampton, Southampton Business School, Department of Banking and Finance, United Kingdom;1. RMIT University, Australia;2. University of Portsmouth, UK;3. Royal Holloway University of London, UK;4. University of Glasgow, UK;1. Department of Economics and Management “Marco Fanno”, University of Padua, Italy;2. School of Business and Management, Centre for Research Into Sustainability (CRIS), Centre for Critical and Historical Research on Organisation and Society (CHRONOS), Royal Holloway University of London, Egham, Surrey, TW20 0EX, UK;1. Manchester Metropolitan University Business School, Department of Accounting, Finance and Banking, Manchester, M15 6BH, United Kingdom;2. Lancaster University Management School, Department of Accounting and Finance, Lancaster, LA1 4YX, United Kingdom;1. Kent Business School – University of Kent, Park Wood Rd, Canterbury, CT2 7FS, UK;2. School of Accounting – RMIT University, 445, Swanston Street, 3000, VIC, Australia;3. Department of Economics and Management, University of Pisa, Via Cosimo Ridolfi, 10, 56124, Pisa, Italy;1. University of Exeter, Exeter Business School, Streatham Court, Room 1.12, Rennes Drive, Exeter, EX4 4PU, UK;2. University of Bath, School of Management, Wessex House, Room 9.18, Claverton Down, Bath, BA2 7AY, UK;3. University of Glasgow, Adam Smith Business School, West Quadrangle, Main Building, Room G683, University Avenue, Glasgow, G12 8QQ, Scotland, UK;4. University of Bath, School of Management, Wessex House, Room 9.52, Claverton Down, Bath, BA2 7AY, UK;1. Queen Mary, University of London, School of Business and Management, Francis Bancroft Building, Mile End Road, London, E1 4NS, United Kingdom;2. The Open University Business School, Department for Accounting & Finance, Walton Hall, Milton Keynes, MK7 6AA, United Kingdom |
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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. |
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| Keywords: | Financial performance Environmental performance Quantile regressions Q51 L25 C14 |
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