The Curvilinear Link between Environment Strategies and Financial Performance in the Real Estate Firms: Beyond Static Dichotomy of Allies or Adversaries

Project: Research

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Description

From natural resource scarcity and global warming to carbon emissions and prolonged haze pollution, environmental deterioration is becoming an increasingly serious problem. As a result, environment strategies have emerged as a priority for business sectors, at least rhetorically, since the publication of the Brundtland Report in 1987. However, despite much literature (e.g., Orlitzky et al., 2003) pointing to the positive effects of corporate social performance on financial performance in general, the conventional wisdom of business sectors concerning their contribution to environmental protection is that the additional costs involved may erode financial performance. Real estate developers also face a similar concern, as there is a widespread perception that it is difficult to make a profit if developers intend to 'go green'. On the other hand, some researchers are equally convinced that going green can lead to better financial performance (e.g., Porter & van der Linde, 1995). The growing importance of articulating green concerns into business sectors is characterized by the lack of an empirically founded plausible theoretical model to understand how environment strategies affect a firm’s financial performance. Resolving this issue involves better understanding the interrelationship between Environment Strategies (ES) and Financial Performance (FP). That is, are ES and FP allies or adversaries?In addition, the growing importance of articulating green concerns into business sectors is characterized by the lack of an empirically founded plausible theoretical model to understand how environment strategies affect a firm’s financial performance. Resolving this issue involves understanding the interrelationship between Environment Strategies (ES) and Financial Performance (FP). In order to advance this long-standing and contentious debate both theoretically and empirically, this study will hypothesize a curvilinear relationship between environment strategy and financial performance for real estate business sector. In other words, we will investigate whether the two long-competing viewpoints (allies or adversaries) may be complementary. In this proposal, it is therefore hypothesized that, as real estate developers adopt more environment strategies, their financial returns will decline at first (in the short term), but then rebound as the environment strategies are increasingly adopted (in the long term).Based on this hypothesis, two interconnected objectives are proposed: a) to model the link between ES and FP from the analysis of longitudinal industry data; and b) to test the ES-FP model empirically in the real estate business sector. To do this, the proposed research project will be conducted within the real estate business context based on a dataset of the annual reports, corporate social sustainability reports and global reporting initiatives of the 208 publicly traded firms in China from 2006 to 2014. The research has potentially profound academic and practical merits. The theoretical model provides potential new answers to the enquiry of the conditional effects of ES on FP. Testing the ES-FP link using longitudinal data of real estate firms has not been carried out before. Also, the proposed ‘beyond dichotomy’ research approach represents a methodological advancement on previous similar studies that adopt an either ‘non-longitudinal’ or ‘subjective’ approach to data collection. In this regard, it may offer original academic value. Practically, it could help resolve the dilemma between government intervention and market value maximization by alerting business leaders to the benefits of implementing proactive environment strategies of their own (e.g., real estate developers mainly opting for green buildings).?

Detail(s)

Project number9048039
Grant typeECS
StatusFinished
Effective start/end date1/01/1627/12/19

    Research areas

  • Environment strategy,Firm performance,real estate industry,sustainable development,