Environmental cost accounting and financial performance: The mediating role of environmental performance

Abstract

This study aims to investigate both the direct and indirect relationships between Environmental Cost Accounting (ECA), Environmental Performance (EP) and Financial Performance (FP). The samples are companies listed in the industrial sector of Amman Stock Exchange. Subjective data using questionnaire are collected to measure ECA and EP, and objective data are obtained from the companies’ annual reports to measure FP. The author used structural equation modeling to analyze the data. The results showed that ECA positively affected EP and FP, also ECA positively affected EP. Moreover, the results confirmed the mediation role of EP on the direct relationship between ECA and FP. This study contributes to the management accounting literature and contingency theory by using structural equation modeling to examine the above-mentioned relationships, which have been neglected in previous studies, and by analyzing more recent data from a developing country perspective. The results will be useful for practitioners in Jordan, especially for management in the industrial companies and the Ministry of Environment.