The effects of corporate environmental practices on financial performance of global companies

The purpose of this paper is to examine the relationship between companies´ environmental management practices and their financial performance. We study a sample of the 500 largest public U.S. companies and we use Newsweek´s Green Ranking index to predict future financial performance a year later. After controlling for size, industry concentration, firm´s growth rate and risk, we are unable to find a significant effect. Therefore, we conclude that environmental practices have neither a positive nor a negative effect on financial performance. Further research could study a longer time horizon by taking longer time-lags into account.