Published Online:October 2024
Product Name:The IUP Journal of Accounting Research & Audit Practices
Product Type:Article
Product Code:IJARAP021024
Author Name:Santi Gopal Maji and Meghna Bharali Saikia
Availability:YES
Subject/Domain:Finance
Download Format:PDF
Pages:23-43
The paper investigates the impact of greenhouse gas (GHG) emissions and their components on the performance of selected Indian and US companies. It also examines the moderating role of environmental sensitivity in the relationship between GHG emissions and financial performance (FP). This study is motivated by the environmental, social and economic implications of climate. Businesses are under increasing pressure to address their environmental footprint, including GHG emissions due to regulatory pressure, investor demands, and shifting consumer preferences. Hence, understanding the impact of their emissions on financial performance is crucial for a firm to make strategic decisions, navigating a sustainable and responsible path in the face of climate change. The sample comprises 50 large Indian and US firms. The study period is 2019-2020 to 2022- 2023. Panel data regression model is employed to examine the issues. 2SLS instrumental variable model and GMM model are used for robustness check. There is a negative relationship between GHG emissions and FP. Further, this relationship is negatively significant for Scope 1 emissions in India and Scope 2 emissions in the US. Moreover, environmental sensitivity moderates the relationship. This implies that the inverse impact of GHG emissions on FP is more for environmentally sensitive industries. The results highlight the need for management to reduce GHG emissions in order to improve the FP of firms. The findings would help companies to adopt uniform and transparent reporting of their emissions to combat reputational risk and from ESG controversies, thereby fostering positive relationships with the stakeholders.
In a time characterized by escalating concerns over climate change and its global effects on sustainability, researchers, policymakers and business stakeholders are increasingly focusing on the relationship between greenhouse gas (GHG) emissions and firm performance.