Corporate Environmental Performance and Firm Value–Using Emission Metrics

An Empirical Study in India

The study aims to examine and analyze the impact of corporate environmental performance (CEP) on firm value (FV) and the extent of disclosure of carbon emission by the sampled firms in India, where Corporate Social Responsibility (CSR) practices are mandatory. The analysis is based on secondary data collected from 40 Indian Carbonex-indexed firms from the period 2015–2019. The present study seeks to investigate the extent of disclosure by the firms and how this disclosure impacts the FV. The panel data regression model is employed to examine the impact of CEP on accounting and market-based firm value. This study uses accounting-based measure-ROA and market-based measure-Tobin’s Q proxies to measure firm value. CEP is captured by three emission metrics (TCO2 EQVE, TENUS, and EMC) extracted from the ESG Eikon database. The findings of the study show a positive link between CEP on FV. We also found that the data related to CSR/CEP disclosure of 34, out of 74 non-finance Carbonex companies are either not available or partially available, despite it being mandatory. Further, the study finds that, although the rest of the Carbonex firms are disclosing their environmental policy, some information pertaining to technology and resource efficiency is less disclosed.