Acta Universitatis Danubius. Œconomica, Vol 15, No 3 (2019)

Abstract

This article investigates the relationship between corporate environmental investment and financial performance. The article examines the effect of carbon emission reduction and hazardous solid waste disposal on company’s return on assets. The paper adopts a quantitative research design by analyzing secondary data from the financial statements of companies listed on the Social Responsibility Index consecutively from 2008 to 2017.   Panel data analysis consisting of the random and fixed effects models was used to analyze the data. The study adopted the Hausman test to determine the most appropriate model. Data was also tested for multi-collinearity and heteroscedasticity in order to enhance the reliability of the regression results. The results produced a mixed result showing positive gains between carbon emissions reduction and return on assets while hazardous solid waste reduction was negatively related to return on assets. Our results have crucial managerial implications as it was established that corporate environmental investment to reduce carbon emissions is vital as they result in different cost savings. Conversely, investments to reduce hazardous solid waste disposal are equally important to establish and maintain a sustainable operational environment and to enhance stakeholder relations but have no direct influence on return on assets.