Does Environmental Risk Affect the Firms' Financial Performance?

Abstract

Companies in South East Asia Countries have significant contributions to improve the countries' economic developments. However, the companies are facing current challenges in which environmental preservation issues receive such lack of attention, and therefore the score of environmental risk tends to increase. The study assumes that the level of environmental risk is affecting the companies' profitability. Using panel data from 1085 companies from Indonesia, Thailand, Singapore, Malaysia, Philippines, and Vietnam for the 2013-2015 period, the study applies Ordinary Least Square (OLS) to examine whether the environmental risk is affecting profitability, proxied by return on assets (ROA). It is interesting, however, that the independent variable does not change ROA. The influence is then becoming significant when the study applies variable controls such as industry, country, year, and total assets. Although, among those controlling variables, total assets and total current liabilities that are not affecting ROA.