Is Being Green Really Paying Off? An Empirical Analysis of the Environmental and Financial Performance of Firms

Abstract

Although prior empirical research indicates that prosperous businesses often have good environmental
performance, there are still unanswered concerns about the basis of this link. Is the observed association the
result of some other underlying company feature, or does improved environmental performance really translate
into better financial success? Is it more profitable to operate clean facilities or to have facilities in comparatively
clean industries?
We examine 652 American manufacturing companies from 1987 to 1996 in order to investigate these issues.
We uncover evidence of a correlation between reduced pollution and greater financial value, but we also
discover that this correlation may be caused by a firm's fixed attributes and strategic position.