AFFI International Conference 2017

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Empirical Evidence on Environmental Performance and Operating Costs

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We investigate how environmental performance affects operating costs using a sample of 785 U.S. firms for the period 2006 – 2014. Environmental performance is measured as the overall environmental rating and the resource reduction score provided by Asset4. We find that better environmental performance is negatively associated with direct production costs, but increases overhead costs. Because direct production costs have a larger impact than overhead costs, aggregate operating costs decline as environmental performance improves. We confirm that our results are robust to endogeneity using an instrumental variables approach.

Author(s):

Jakob Koegst    
University of Muenster
Germany

Nadja Guenster    
University of Muenster
Germany

 

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