Title: Environmental concerns and financial performance: evidence from the EU regulatory framework

Authors: Ricardo Correia; Carmen Mendoza; Nuria Suárez

Addresses: Finance and Marketing Department, Universidad Autónoma de Madrid, Francisco Tomás y Valiente, 5, 28049, Madrid, Spain ' Finance and Marketing Department, Universidad Autónoma de Madrid, Francisco Tomás y Valiente, 5, 28049, Madrid, Spain ' Finance and Marketing Department, Universidad Autónoma de Madrid, Francisco Tomás y Valiente, 5, 28049, Madrid, Spain

Abstract: We analyse the impact of carbon and greenhouse gas emissions on firms' accounting and market performance. Over a sample of 115 non-financial firms from 9 European countries during the 2008-2016 period, our results suggest that higher volume of both country-level carbon and greenhouse emissions have, on average, a positive and statistically significant impact on firms' accounting performance. However, no statistical effect is found in terms of stock market performance. The results are more relevant in the case of firms with higher levels of equity and higher levels of intangible assets. We document the existence of an inverse U-shaped relation between country-level greenhouse emissions and firms' performance suggesting that, after a certain point, greenhouse gas emissions negatively affect firms' performance. Our results are robust to different estimation technics and control variables, to the consideration of the financial crisis period, and to the inclusion of financial firms in the sample.

Keywords: carbon emissions; greenhouse gas emissions; accounting performance; market performance; EU.

DOI: 10.1504/IJISD.2024.138151

International Journal of Innovation and Sustainable Development, 2024 Vol.18 No.3, pp.322 - 349

Accepted: 15 Jun 2022
Published online: 30 Apr 2024 *