Does environmental performance affect financial performance? A meta-analysis

What do we know about the impact of environmental regulations/performance on firm performance? After more than three decades of theoretical as well as empirical research, the results seem to remain inconclusive. Some papers suggest that regulations harm firms, while others claim that regulations may contribute positively and give an impetus to innovations. Therefore, I examine the heterogeneity in financial–environmental performance nexus, empirically carrying out a meta-regression analysis of 64 outcomes from 37 empirical studies to uncover the underlying factors, which can influence the observed variation in the empirical results. The results suggest both that the empirical method used matters for the nexus and that the likelihood of finding a negative link between environmental and financial performance significantly increases when using simple correlation coefficients instead of more advanced econometric analysis. The results also indicate that the portfolio studies tend to report a negative link between environmental and financial performance. This likely reflects the omitted factors in portfolio studies. The positive link is found more frequently in common law countries than in civil law countries. The results also point to the importance of appropriate time coverage to establish a positive link between environmental and financial performance.