Corporate Environmental Performance and Financial Distress: Evidence from Australia

Abstract

This study examines the association between corporate environmental performance and financial distress. Using a sample of Australian firms, we find that environmental performance is negatively related to the financial distress probability perceived by the market. In addition, the negative association between environmental performance and the financial distress probability is more pronounced for firms with a higher level of risk. The findings provide important empirical evidence regarding the implications of environmental performance on firms’ risk management.