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Relations between corporate economic performance, environmental disclosure and greenhouse gas emissions: New insights
Author(s) -
Hassan Omaima A.G.,
Romilly Peter
Publication year - 2018
Publication title -
business strategy and the environment
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.123
H-Index - 105
eISSN - 1099-0836
pISSN - 0964-4733
DOI - 10.1002/bse.2040
Subject(s) - endogeneity , causation , greenhouse gas , economics , causality (physics) , simultaneous equations model , causal model , government (linguistics) , structural equation modeling , public economics , econometrics , political science , ecology , computer science , biology , medicine , linguistics , philosophy , physics , pathology , quantum mechanics , machine learning , law
Abstract This study examines the associations and causations between corporate economic performance, environmental disclosure and greenhouse gas emissions, utilizing a large, longitudinal, multicountry dataset disaggregated between developed and developing countries. The methodology uses a simultaneous equation model with system estimation to deal with endogeneity between the variables, and Granger causality tests to indicate their direction of causation. A robust result is that lower emissions are strongly associated with better economic performance. After pretesting for stationarity, we find evidence of a one‐way causation from emissions and environmental disclosure to economic performance, but no evidence of reverse causation. We also find strong evidence of a one‐way causation from emissions to disclosure, but no evidence of reverse causation. The overarching policy implication is that environmental performance, as measured by greenhouse gas emissions, plays a crucial role in the formulation of business strategy at the firm level and government environmental policy at national and international levels.