This study examines the effect of environmental costs on financial performance
for financial services and manufacturing companies across the world
from 2002 to 2009.Using a unique dataset on environmental costs from Trucost,
this research measures the effect of environmental performance, as proxied
by environmental costs, on financial performance for firms in USA, Europe
and Asia. Our study shows that the environmental costs negatively affect
return on equity (ROE) and this finding is consistent across all regionscompanies.
However, for European manufacturing companies, profit margin is
affected positively by environmental costs. This paper also shows that the environmentals
cost of financial services company is higher than that of manufacturing
companies. This suggests that the carbon footprint, which equals
revenue-normalized volume of total emission, used in this study has provided
proportional measures that not only consider emission alone but also revenue
of companies, regardless their industries and regions.
This study examines the effect of environmental costs on financial performance
for financial services and manufacturing companies across the world
from 2002 to 2009.Using a unique dataset on environmental costs from Trucost,
this research measures the effect of environmental performance, as proxied
by environmental costs, on financial performance for firms in USA, Europe
and Asia. Our study shows that the environmental costs negatively affect
return on equity (ROE) and this finding is consistent across all regionscompanies.
However, for European manufacturing companies, profit margin is
affected positively by environmental costs. This paper also shows that the environmentals
cost of financial services company is higher than that of manufacturing
companies. This suggests that the carbon footprint, which equals
revenue-normalized volume of total emission, used in this study has provided
proportional measures that not only consider emission alone but also revenue
of companies, regardless their industries and regions.
