RIEB Discussion Paper Series No.2013-01
The Influence of Voluntary and Mandatory Environmental Performance on Financial Performance: An Empirical Study of Indonesian Firms
This paper, using data derived from a questionnaire survey of Indonesian firms, analyzes not only whether a firm's environmental performance improves its financial performance, but also whether this relationship depends on the firm's stance on conducting environmental management voluntarily or mandatorily. The estimation results suggest that a reduction of greenhouse gas (GHG) emissions increases a firm's profit, because firms that conduct environmental management voluntarily are more likely to reduce GHG emissions. However, this is not the case for the reduction of pollution emissions, because firms that conduct environmental management mandatorily are more likely to reduce pollution emissions. These results imply that only firms conducting environmental management voluntarily can improve financial performance through better environmental performance in Indonesia.
Research Institute for Economics and Business Administration
Rokkodai-cho, Nada-ku, Kobe
Ministry of the Environment, Indonesia
Faculty of Human Ecology, Bogor Agriculture University, Indonesia
Graduate School for International Development and Cooperation, Hiroshima University, Japan