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Empirical Analysis of Corporate Sustainability Performance: Linkage of Japanese Firms’ Environmental and Economic Performance

Authors:

K. Gnanaweera ,

Toyama Prefectural University, JP
About K.
PhD candidate at the Department of Environmental Engineering
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N. Kunori

Women’s University, JP
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Abstract

The linkage between Corporate Environmental Performance (CEP) and Corporate Financial Performance (CFP) has been a long-standing debate since all previous efforts achieved inconsistent results. The current study therefore attempts to present the relationship between corporations’ environmental and financial performance to explore the notion of Corporate Social Responsibility (CSR) in a developed nation. This case derives empirical observational data from corporate sustainability reports and integrated annual reports of Japanese firms. The sample is comprised of observational data of a total of 85 Japanese corporations from 2008 to 2014. The selected firms are listed on the Tokyo Stock Exchange in the first section of the market division and are categorized under various industrial sectors. The effort of the current study has revealed that corporate environmental measurements have different effects on financial performance. The evidence was less strong in evaluating the impact level of all variables except firm size (total assets). Three hypotheses (H1, H2, and H3) were developed for further evaluation of the effect of financial indicators on environmental performance. H1 was accepted since environmental performance has a significant impact on firm size. However, the rejected H2 and H3 state that environmental performance has no significant impact on financial leverage and profitability, due to the weak relationship or insignificant outcome, i.e. in the profitability measurement, only Return on Sales (ROS) showed positive correlation between particular CEP variables, but the coefficient of determination (R2 values and the relationship between CEP and CFP are broad spectrums that yet to be explored.

How to Cite: Gnanaweera, K., & Kunori, N. (2017). Empirical Analysis of Corporate Sustainability Performance: Linkage of Japanese Firms’ Environmental and Economic Performance. Vidyodaya Journal of Management, 3(2), 1–33.
Published on 01 Dec 2017.
Peer Reviewed

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