{"title":"Carbon Management System Quality and Corporate Financial Performance","authors":"P. Shrestha, Bobae Choi, L. Luo","doi":"10.1142/s1094406023500014","DOIUrl":null,"url":null,"abstract":"Synopsis The research problem This study examines the relationship between carbon management system quality and firm performance and investigates the mechanisms through which a carbon management system relates to firm performance. Motivation or theoretical reasoning Despite growing attention from academia and practice on carbon accounting in recent years, little is known about firms’ strategic implementation of carbon management systems and their impact on firms’ financial outcomes. Drawing on the resource-based view and institutional theory, this study argues that carbon management system implementation can create competitive advantages for firms through product differentiation and cost leadership. However, adopting quality management systems for carbon mitigation can be costly for firms. Additionally, not all firms would achieve such a differentiation advantage through a carbon management system. The test hypotheses H1: There is no relationship between the quality of a carbon management system and firm financial performance. H2: Carbon-intensive sectors have no moderating effect on the relationship between the quality of a carbon management system and firm financial performance. Target population Corporate managers and stakeholders including investors, international regulators, and standard settees. Adopted methodology Ordinary least square regressions. Analyses Corporate financial performance is measured by return on assets, calculated as earnings before extraordinary items divided by total assets at fiscal year-end. Our independent variable of interest is the quality measure of a carbon management system (QCMS). Following Tang and Luo ( 2014 ) and Luo and Tang ( 2016 ), QCMS is calculated as the average equal weighted sum of the standardized values from the 10 elements of a carbon management system. For additional tests, alternative performance measures (e.g., Tobin’s Q, return on equity, operating return on assets [ROA], and cash flow from operating activities to total assets) and disaggregated ROA components are employed as dependent variables. Findings We find that a firm’s carbon management system quality is positively associated with its financial performance. A better-quality carbon management system is especially associated with higher revenues, margins, and R&D expenditures. In addition, individual carbon management system components exhibit heterogeneous influences on financial performance. Specifically, the areas related to carbon disclosure and external carbon assurance have an incremental impact on financial performance. The positive association between a carbon management system and financial performance is stronger for firms operating in carbon-intensive sectors and firms with a higher level of carbon emissions. The carbon regulation affects the sensitivity of financial performance differently in intensive and non-intensive sectors in response to carbon management system quality.","PeriodicalId":47122,"journal":{"name":"International Journal of Accounting","volume":null,"pages":null},"PeriodicalIF":2.0000,"publicationDate":"2023-01-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"1","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"International Journal of Accounting","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.1142/s1094406023500014","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 1
Abstract
Synopsis The research problem This study examines the relationship between carbon management system quality and firm performance and investigates the mechanisms through which a carbon management system relates to firm performance. Motivation or theoretical reasoning Despite growing attention from academia and practice on carbon accounting in recent years, little is known about firms’ strategic implementation of carbon management systems and their impact on firms’ financial outcomes. Drawing on the resource-based view and institutional theory, this study argues that carbon management system implementation can create competitive advantages for firms through product differentiation and cost leadership. However, adopting quality management systems for carbon mitigation can be costly for firms. Additionally, not all firms would achieve such a differentiation advantage through a carbon management system. The test hypotheses H1: There is no relationship between the quality of a carbon management system and firm financial performance. H2: Carbon-intensive sectors have no moderating effect on the relationship between the quality of a carbon management system and firm financial performance. Target population Corporate managers and stakeholders including investors, international regulators, and standard settees. Adopted methodology Ordinary least square regressions. Analyses Corporate financial performance is measured by return on assets, calculated as earnings before extraordinary items divided by total assets at fiscal year-end. Our independent variable of interest is the quality measure of a carbon management system (QCMS). Following Tang and Luo ( 2014 ) and Luo and Tang ( 2016 ), QCMS is calculated as the average equal weighted sum of the standardized values from the 10 elements of a carbon management system. For additional tests, alternative performance measures (e.g., Tobin’s Q, return on equity, operating return on assets [ROA], and cash flow from operating activities to total assets) and disaggregated ROA components are employed as dependent variables. Findings We find that a firm’s carbon management system quality is positively associated with its financial performance. A better-quality carbon management system is especially associated with higher revenues, margins, and R&D expenditures. In addition, individual carbon management system components exhibit heterogeneous influences on financial performance. Specifically, the areas related to carbon disclosure and external carbon assurance have an incremental impact on financial performance. The positive association between a carbon management system and financial performance is stronger for firms operating in carbon-intensive sectors and firms with a higher level of carbon emissions. The carbon regulation affects the sensitivity of financial performance differently in intensive and non-intensive sectors in response to carbon management system quality.
期刊介绍:
The aim of The International Journal of Accounting is to advance the academic and professional understanding of accounting theory, policies and practice from the international perspective and viewpoint. The Journal editorial recognizes that international accounting is influenced by a variety of forces, e.g., governmental, political and economic. Thus, the primary criterion for manuscript evaluation is the incremental contribution to international accounting literature and the forces that impact the field. The Journal aims at understanding the present and potential ability of accounting to aid in analyzing and interpreting international economic transactions and the economic consequences of such reporting. These transactions may be within a profit or non-profit environment. The Journal encourages a broad view of the origins and development of accounting with an emphasis on its functions in an increasingly interdependent global economy. The Journal also welcomes manuscripts that help explain current international accounting practices, with related theoretical justifications, and identify criticisms of current policies and practice. Other than occasional commissioned papers or special issues, all the manuscripts published in the Journal are selected by the editors after the normal double-blind refereeing process.