The Effect Of Carbon Emissions And Firm Performance: A Case Study Of Emerging Market

Abstract

This thesis investigates the correlation between carbon emissions and firm performance in an emerging market, aiming to comprehend the influence of carbon emissions on financial indicators. Employing a quantitative approach, the study examines data from a sample of 16,008 firms operating in 121 emerging market countries. The baseline regression analyses, utilizing three distinct scaling methods, consistently reveal a statistically significant and negative association between carbon emissions and firm performance, as indicated by Return on Assets (ROA). The results demonstrate that higher carbon emissions are linked to lower firm performance across all scaling methods. Notably, this detrimental impact is more pronounced in larger firms compared to their smaller counterparts. Furthermore, firms operating in jurisdictions with stronger legal frameworks experience a relatively moderated negative effect of carbon emissions on their performance, in contrast to those operating in weaker legal environments. These findings emphasize the crucial role of considering carbon emissions as a significant factor influencing firm performance in emerging markets. In terms of future research implications, there is a need for further exploration of mechanisms to mitigate the adverse consequences of carbon emissions on firm performance and to identify strategies for fostering sustainable growth in emerging markets