The Effect of Operational Efficiency on Adopting Environmental Management Practices

The paper examines the relationship between a firm’s financial performance and environmental management practices (EMP). Previous studies show inconsistent results on the relationship between return on assets (ROA) and EMP. The paper posits that the firm may consider different components of financial performance when making a decision. The study focuses on the net profit margin and asset turnover, two components of the Dupont analysis, and tests whether they have different effects on EMP adoption. The paper also explores how environmental risk may moderate the impact of operational efficiency on these practices. The study uses data from 2002 to 2013 and finds that firms with higher operational efficiency are more inclined to adopt EMP, while measures such as ROA, ROE, and asset turnover do not demonstrate any substantial effect