The impact that environmental practices have on companies' performance has often been analyzed in the literature, and the findings are inconclusive. Several researchers argue that further evidence is needed to better understand this relationship, and in particular, the effect that some variables could have on it. Consequently, the main aim of this research was to analyze whether company reputation, the institutional environment, and industry affect the impact of environmentally friendly practices on financial performance. The research found its theoretical foundation in eco-efficiency, trade-off, institutional, and agency theories. The sample comprised 198 high-performing manufacturing companies across 9 countries. Data were collected using a specific questionnaire designed to capture managers' perceptions of the relevant variables and analyzed through partial least squares structural equation modeling. The findings indicate that environmentally friendly practices positively influence companies' financial performance. However, contrary to previous evidence, company reputation does not appear to mediate this relationship. Instead, the institutional environment as well as the subsector in which a company operates play a moderating role. These findings are particularly valuable for managers since they reinforce the rationale for adopting proactive environmental strategies. This research contributes to previous literature, providing new insights about the impact of environmentally friendly behaviors on financial performance within the context of manufacturing companies, as well as the roles that reputation and institutional environments play in this relationship.
Citation: Bernabé Escobar-Pérez, Silvia Fresneda-Fuentes, María del Mar Miras-Rodríguez. The impact of environmental practices on financial performance: Do reputation, institutional environment, and industry type matter?[J]. Green Finance, 2025, 7(3): 429-449. doi: 10.3934/GF.2025016
The impact that environmental practices have on companies' performance has often been analyzed in the literature, and the findings are inconclusive. Several researchers argue that further evidence is needed to better understand this relationship, and in particular, the effect that some variables could have on it. Consequently, the main aim of this research was to analyze whether company reputation, the institutional environment, and industry affect the impact of environmentally friendly practices on financial performance. The research found its theoretical foundation in eco-efficiency, trade-off, institutional, and agency theories. The sample comprised 198 high-performing manufacturing companies across 9 countries. Data were collected using a specific questionnaire designed to capture managers' perceptions of the relevant variables and analyzed through partial least squares structural equation modeling. The findings indicate that environmentally friendly practices positively influence companies' financial performance. However, contrary to previous evidence, company reputation does not appear to mediate this relationship. Instead, the institutional environment as well as the subsector in which a company operates play a moderating role. These findings are particularly valuable for managers since they reinforce the rationale for adopting proactive environmental strategies. This research contributes to previous literature, providing new insights about the impact of environmentally friendly behaviors on financial performance within the context of manufacturing companies, as well as the roles that reputation and institutional environments play in this relationship.
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Figures(4) / Tables(6)
Bernabé Escobar-Pérez, Silvia Fresneda-Fuentes, María del Mar Miras-Rodríguez. The impact of environmental practices on financial performance: Do reputation, institutional environment, and industry type matter?[J]. Green Finance, 2025, 7(3): 429-449. doi: 10.3934/GF.2025016
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