Academy of Accounting and Financial Studies Journal (Print ISSN: 1096-3685; Online ISSN: 1528-2635)


The Association Between Environmental Performance and Financial Performance: The Case of Egypt

Author(s): Sherine I. El-Mohr, Islam Elshahat, Ahmed Elshahat, Mohamed B. Hassan

The terms “corporate social performance” or, alternatively, “corporate social responsibility” (CSR) are often used synonymously and comprise both social as well as environmental measures. The efficient markets hypothesis suggests that capital markets respond to information and, accordingly, adjust the stock prices either positively or negatively. The research literature is rich with articles addressing the empirical association between environmental and financial performance, yet the results are inconclusive. The aim of this research is to provide evidence on the nature of the association between environmental performance and firms’ market value and profitability in the developing countries, particularly Egypt. The environmental performance is assessed on a dichotomous basis of whether firms earned their ISO 14001 (listed) or not (not listed). The financial performance is measured using capital market return which is measured using the cumulative stock returns. The results indicate an insignificant relationship between environment performance and cumulative stock returns. The results indicate that companies in Egypt do not care much about other dimensions of corporate social responsibility including environment which might be due to the weak CSR education of the Egyptian stakeholders.

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