Impact of Corporate Environmental Responsibility on Firm’s Financial Performance: Moderating Role of Organizational Slack and Industry Competition

Abstract

Due to speedy trade and industry expansion in the emerging economies it is creating stern environmental corrosion. Effluence makers’ enterprises are mostly responsible for environmental deterioration. Therefore, it is the responsibility of those firms to take steps to control this corrosion in the environment. This research explains the effect of corporate environmental responsibility (CER) on corporate financial performance (CFP) with the moderating effect of organizational slack and industry competition. Data was collected from annual reports of 50 KSE 100 index companies from 2012-2019, containing total 450 observations. Dynamic penal model was used to test the study hypothesis by using Eviews, different pre and post estimations are applied to confirm the data validity.  Empirical results indicate that corporate environmental responsibility has significant positive effect on corporate financial performance, while the moderating effect of organizational slack is negative. Industry competition has significant positive moderating effect on the relationship, i.e., if there is high competition in industry then firms will invest more in environment to attract more consumers and to create good will in market. The study reveal that those firms will lead where competition is high and who will focus on their responsibility towards environment.