Title: Nexus between carbon emission and financial performance moderated by environmental sensitivity: evidence from emerging economy

Authors: Avani Raval; Rajesh Desai; Kedar Bhatt

Addresses: Institute of Management, Nirma University, Ahmedabad, Gujarat, India ' Chimanbhai Patel Institute of Management and Research, Opp. Karnavati Club, Near Shapath – IV, Prahladnagar, S.G. Highway, Ahmedabad – 380015, Gujarat, India ' Chimanbhai Patel Institute of Management and Research, Opp. Karnavati Club, Near Shapath – IV, Prahladnagar, S.G. Highway, Ahmedabad – 380015, Gujarat, India

Abstract: Though the impact of carbon emission on financial performance has been studied widely, it has not been explored much in emerging economies. The present study aims to examine the relationship between carbon emission and financial performance (accounting as well as market-based) of Indian companies along with the moderating effect of environmental sensitivity on this relationship. Using panel least square regression analysis, we found negative but insignificant impact of carbon emissions on financial performance. However, environmental sensitivity was found to have a strong positive moderating effect on this relationship, indicating that negative impact of carbon emission is more intense for environmentally sensitive firms. The robustness of results has been validated through change in method, controlling for self-selection bias, and endogeneity issues. The findings of the present study will assist managers, government, and policy makers in decision making on emission management by considering the nature of the industry.

Keywords: carbon emission; financial performance; sustainability; environmental sensitivity; moderation.

DOI: 10.1504/IJMFA.2021.120516

International Journal of Managerial and Financial Accounting, 2021 Vol.13 No.3/4, pp.209 - 231

Received: 04 Jan 2021
Accepted: 19 May 2021
Published online: 24 Jan 2022 *

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