An Empirical Study of Firm Environmental and Financial Performance: Evidence from Small and Medium Manufacturing Firms in Vietnam
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Abstract
Abstract. There has been interest regarding the effects of environmental performance on financial performance over a given period. This paper studies the relationship between environmental and financial performance in Vietnam’s small and medium manufacturing firms by using the World Bank 2005 data on “Productivity and the Investment Climate”. Particularly, this research has investigated the relationship between ROA, accounting based measure of financial performance in the short term, and inspected times, an environmental variable measured by the number of times that a firm was inspected by the Environmental Agency. A firm that has incurred a high number of inspections has low environmental compliance. Based on a different level of environmental performance, this study constructs the “SME_high polluting” (SME_H) and “SME_low polluting” (SME_L) portfolio. The analytical results indicate that better pollution control neither improves nor undermines financial success. The SME_H group shows that high-inspected time, implying poor environmental performance has a statistically significant and positive impact on ROA implications for financial performance. The SME_L group, environmental and financial performances are not related statistically. Finally, several implications for SMEs, government sector, and researchers as well as future research direction are also provided.
Keywords: Environmental, financial, performance, SMEs.References
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