ScienceDirect Publication: Finance Research Letters
Mon, 17 Feb 2020 18:01:08 GMT language
Publication date: Available online 16 February 2020
Source: Finance Research Letters
Author(s): Béchir Ben Lahouel, Maria-Giuseppina Bruna, Younes Ben Zaied
We employ the Panel Smooth Transition Regression model to explore the non-linear relationship between environmental performance and financial performance. Our main purpose is to ask to the long-standing question ‘when it pays to be green?’ by identifying the threshold values of environmental performance that determine the smoothness of regime switching. Using a panel of 61 French companies from 2005 to 2017, our results show an inverted-U relationship and an inverted-V relationship when Tobin's Q and ROA are respectively used. Our findings support the standard microeconomic theory as well as the outcomes of environmental regulations within the Porter Hypothesis theoretical reasoning.