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Sustainability 2015, 7(3), 2513-2553; doi:10.3390/su7032513

The Influence of Environmental and Social Performance on Financial Performance: Evidence from Romania’s Listed Entities

1
Faculty of Accounting and Management Information Systems, Bucharest University of Economic Studies, 6 Piata Romana, 1st district, Bucharest 010374, Romania
2
Faculty of Finance, Insurance, Banking and Stock Exchange, Bucharest University of Economic Studies, 5-7 Mihail Moxa, 1st district, Bucharest 010961, Romania
These authors contributed equally to this work.
*
Author to whom correspondence should be addressed.
Academic Editors: Istudor Nicolae, Andrei Jean Vasile and Popescu Gheorghe
Received: 4 December 2014 / Revised: 24 February 2015 / Accepted: 25 February 2015 / Published: 3 March 2015
View Full-Text   |   Download PDF [841 KB, uploaded 3 March 2015]

Abstract

Companies that are listed on a stock exchange should know that reporting only financial measures is not enough for ensuring sustainable development. To be truly competitive, they should also include information about environmental policies and about the benefits that the company offers to its employees. The present research aims to provide information on how Romanian listed companies report environmental and social indicators and whether or not this has an impact on financial performance. We used a four time period panel fixed effect model for Romanian companies that are listed in the first category of the Bucharest Stock of Exchange. The results point out that increasing water, air and soil protection has a negative impact on current return on equity, while no effects were detected on return on assets and stock market returns. Other environmental variables such as gas, energy or sound were found not to be statistically significant. Training and benefits after retirement have a mixed effect on financial measures. The research correlates Romanian accounting regulation changes with companies’ characteristics and the influence of financial audit on financial performance, and concludes that increasing environmental and social protection could have an impact on financial performance in the long run, as positive correlation was detected between social or environmental performance and stock market returns one year after the changes occurred. View Full-Text
Keywords: environmental reporting; social reporting; financial auditor; financial performance; International Financial Reporting Standards (IFRS); panel model; Stock Exchange; Romania environmental reporting; social reporting; financial auditor; financial performance; International Financial Reporting Standards (IFRS); panel model; Stock Exchange; Romania
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).

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MDPI and ACS Style

Dobre, E.; Stanila, G.O.; Brad, L. The Influence of Environmental and Social Performance on Financial Performance: Evidence from Romania’s Listed Entities. Sustainability 2015, 7, 2513-2553.

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