135 CHAPTER 5
SUMMARY, RECOMMENDATIONS AND CONCLUSION
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carbon output intensity and carbon input intensity does not significantly affect any of the financial performance indicators of this study, measured ROA, ROS, EQRTNS & MVE/S. When the study employed Arellano-Bond dynamic panel data estimations the results showed a significant and negative effect of carbon input intensity (ENGINT) on EQRTNS at level 0.002. Furthermore, OLS results on pooled data indicate that improvement in carbon intensity input (ENGINT) is value destroying and does not enhance firms’ competitiveness with respect to ROA and ROS. On the contrary, pooled data results show that improvement in carbon output intensity (EMSINT) is value driven and enhances corporate competitiveness with respect to ROA and ROS. Arellano-Bond DPD estimations results also show that improvement in carbon input intensity (ENGINT) is value destroying with respect to EQRTNS. The study also found consistencies in the direction of association between carbon input intensity (ENGINT)-ROA, ROS and EQRTNS relations, and between carbon output intensity (EMSINT)-ROA, ROS relations with respect to OLS and Arellano-Bond estimations. Using panel Granger causality approach the author found that the lags of ENGINT do not improve a forecast of financial performance, and the opposite is also true. It was found however that a unidirectional relationship between EMSINT and EQRTNS at 1% significant level exists. Impliedly, the lags of EMSINT do improve a forecast of financial performance (EQRTNS). The author also found a bidirectional relationship between EMSINT and MVE/S at 1% significant levels. It can thus be concluded that prior improvement in EMSINT leads to subsequent improvement in EQRTNS.
It is also true to say that as prior improvement in EMSINT subsequently improves MVE/S. Prior performance in MVE/S subsequently improves EMSINT of the SRI Index’s firms. Cross sectional dependence test rejected the null of no cross- sectional dependence across the members of panel.
Objective 2: To estimate how accounting and market-based performance of JSE’s SRI firms responds to shocks in carbon input/ output intensity.
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Using impulse response function analysis in short panel vector auto regressions (SPVARs), results from chapter 4 show that ROA responds negatively to shocks in carbon input intensity (ENGINT) and persists for the first 4 years and afterwards reverts to the equilibrium. On carbon output intensity on (EMSINT)-ROA relations, the results show that ROA responds positively to shocks in carbon output intensity and persists for 7 years before attaining equilibrium. On carbon input intensity on (ENGINT)-ROS relations, the results show that the ROS response is negative to shocks in ENGINT and persists for 8 years. On carbon output intensity (EMSINT)- ROS relations the study found that on average shocks in carbon output intensity (EMSINT) enhances firms’ competitiveness for the first 2 years, and thereafter showed value destroying tendencies through to the sixth year before attaining equilibrium. Furthermore, the study found that shocks in carbon input intensity (ENGINT) is value destroying with respect to EQRTNS and persists for 6 years after which EQRTNS starts to move towards equilibrium. On carbon output intensity (EMSINT)-EQRTNS the results show that on average the EQRTNS responds negatively to shocks in EMSINT and persists for 7 years before gaining stability. On ENGINT-MVE/S relations the results show that MVE/S sustains shocks from ENGINT for almost 4 years, after which unobserved and minimal intermittent positive and negative tendencies are exhibited through to year 8. On EMSINT-MVE/S relations the study observe that shocks in carbon output intensity (EMSINT) are sustained by MVE/S through-out the period. The study concludes that on average shocks in carbon output intensity tend to enhance firms’
competitiveness. While shocks in carbon input intensity shows value destroying tendencies. Again, the study found MVE/S to sustain shocks from carbon output / input intensity. Furthermore, the results from OLS, Arellano-Bond estimation, and Impulse response analysis all show that reduction in carbon output intensity (EMSINT) enhances corporate competitiveness and is value driven, while reduction in carbon input intensity show value destroying effects.
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Objective 3: To determine the carbon intensity threshold effect on accounting and market-based performance of JSE’s SRI firms.
Utilising threshold estimations and applying bootstrap tests for the presence of thresholds, results from chapter 4.3 indicate the presence of a carbon output/ input intensity threshold effect on financial performance of JSE’s SRI firms. The results indicate that ROA decreases by - 0.08868, while ROS decreases by – 3.0147 when ENGINT ratio exceed 0.00093. The results also show that when the ENGINT ratio is between 0.00017 and 0.00093, ROA and ROS increases by 0.29772 and 0.2413 respectively. The author also found that the ENGINT-ROS relationship (slope value) varies in accordance with different changes in ENGINT, with ENGINT showing a non-linear relationship (inverted U-shape). The study also found that MVE/S goes through a tremendous increase when the carbon input intensity (ENGINT) ratio exceeds 0.00093, especially when the ENGINT ratio is in the range of 0.00093 and 0.00110. It was also found that the ENGINT-MVE/S relations (slope value) vary in accordance with different changes in ENGINT, with ENGINT showing a linear relationship (inverse U-shape). It was further found that ROA is at its highest when the EMSINT ratio exceeds 0.00053 with ROA increasing by 0.51799. ROS seemed to be at its highest increase of 1.0841738 when EMSINT ratio is between 0.00044 and 0.00061. MVE/S also shows an improvement at the point where EMSINT ratio is between 0.00053 and 0.00055.
KING III (2009) enjoins companies to disclose environment data (e.g. emissions and energy usage) in order to allow interested parties to have full knowledge regarding how companies are interacting with the environment. Findings from this study was aided by the fact that companies adhered to stakeholder requirements and disclose such environmental data to help parties to make informed decisions.
Findings from this study support stakeholder theory as the results showed the extent to which companies manage energy related resources to create a balance between sustainability engagements and financial gains. The findings also support
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institutional theory as the results seemed to show why companies institute integrated/ multifaceted programmes and activities in the attempt to enhancing their interaction with the environment and meeting stakeholder demands.