Carbon Emissions and Firm Performance: Evidence from Financial and Non-Financial Firms from Selected Emerging Economies

ABSTRACT

This paper examines the effects of carbon emissions on the accounting and market-based performance of financial and non-financial firms in emerging economies. Data for 104 financial and 328 non-financial firms constituting 2591 observations operating in 22 emerging economies were collected from the Datastream database for the period 2011–2020. We applied OLS and 2SLS regression techniques to analyze the data. Results show that financial firms emit less carbon than their non-financial counterparts. The results further show that carbon emissions reduce firms’ return on equity, Tobin’s Q, Z-score, and credit rating. Our findings remain robust in different estimation techniques and alternative proxies of performance. Our results have some important policy implications for emerging economies.