Environmental and Resource Economics

, Volume 46, Issue 3, pp 303–329 | Cite as

Effect of Corporate Economic Performance on Firm-Level Environmental Performance in a Transition Economy

  • Dietrich EarnhartEmail author
  • Lubomir Lizal


This paper analyzes the effect of corporate economic performance, as measured by value added, on firm-level environmental performance in a transition economy. In particular, it analyzes this economic performance effect using an unbalanced panel of Czech firms for the years 1995–1998. It assesses whether successful economic performance begets or undermines good environmental performance. This connection seems especially important in transition economies since firms are dramatically restructuring their economic management approaches during transitional periods. A majority of the analytical results indicate that successful economic performance undermines good environmental performance, possibly indicating that more focused managerial efforts to improve economic outcomes may distract efforts to manage environmental matters better.


Czech Republic Environmental protection Financial performance Pollution 

JEL Classification

D21 G39 Q53 


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Anton WR, Deltas G, Khanna M (2004) Incentives for environmental self-regulation and implications for environmental performance. J Environ Econ Manag 48: 632–654CrossRefGoogle Scholar
  2. Arimura T, Hibiki A, Johnstone N (2005) An empirical study of environmental R&D: what encourages facilities to be environmentally-innovative? Presented at the OECD conference on public environmental policy and the private firm. Washington, DC, June 14–15Google Scholar
  3. Austin D, Alberini A, Videras J (1999) Is there a link between a firm’s environmental and financial performance? Presented at NBER summer institute public economics workshop: public policy and the environment. Cambridge, MAGoogle Scholar
  4. Bluffstone R (1999) Are the costs of pollution abatement lower in central and Eastern Europe? Evidence from Lithuania. Environ Dev Econ 44: 449–470CrossRefGoogle Scholar
  5. Bruha J, Scasny M (2006) Economic analysis of driving forces of environmental burden during the transition process: EKC hypothesis testing in the Czech Republic. Charles University Environment Center, MimeoGoogle Scholar
  6. Bruyn SM (1997) Explaining the environmental Kuznets curve: structural change and international agreement in reducing sulphur emissions. Environ Dev Econ 2(4): 485–503CrossRefGoogle Scholar
  7. Cameron AC, Trivedi PK (2005) Microeconometrics: methods and applications. Cambridge University Press, New YorkGoogle Scholar
  8. CERGE-EI (1998) Czech Republic 1997: the year of crises. Center for Economic Research and Graduate Education—Economics Institute, PragueGoogle Scholar
  9. Černá A, Tošovská E (1994) Economic transformation and the environment. Center for economic research and graduate education—Economics institute (CERGE-EI), working paper # 57 (Apr, 1994)Google Scholar
  10. Cherp A, Kopteva I, Mnatsakanian R (2003) Economic transition and environmental sustainability: effects of economic restructuring on air pollution in the russian federation. J Environ Manag 68: 141–151Google Scholar
  11. Claessens S, Djankov S (1999) Ownership concentration and corporate performance in the Czech Republic. J Comp Econ 27(3): 498–513CrossRefGoogle Scholar
  12. Czech Ministry of Environment: (1992) Statistical environmental yearbook of the Czech Republic: 1992. Czech Ministry of the Environment, PragueGoogle Scholar
  13. Czech Ministry of Environment: (1994) Statistical environmental yearbook of the Czech Republic: 1993–1994. Czech Ministry of the Environment, PragueGoogle Scholar
  14. Czech Ministry of Environment: (1998) Statistical environmental yearbook of the Czech Republic: 1999. Czech Ministry of the Environment, PragueGoogle Scholar
  15. Czech Ministry of Environment: (1999) Statistical environmental yearbook of the Czech Republic: 1999. Czech Ministry of the Environment, PragueGoogle Scholar
  16. Czech Ministry of Environment: (2003) Report on the environment in the Czech Republic in 2003. Czech Ministry of the Environment, PragueGoogle Scholar
  17. Czech Ministry of Environment: (2004) Report on the environment in the Czech Republic in 2004. Czech Ministry of the Environment, PragueGoogle Scholar
  18. Dasgupta S, Laplante B, Wang H, Wheeler D (2002) Confronting the environmental Kuznets curve. J Econ Pers 16(1): 147–168CrossRefGoogle Scholar
  19. Djankov S (1999) Ownership structure and enterprise restructuring in six newly independent states. Comp Econ Stud 41(1): 75–95CrossRefGoogle Scholar
  20. Earnhart D (2006) Factors shaping corporate environmental performance: regulatory pressure and financial status. Presented at the association of environmental and resource economists (AERE) meetings in Boston, MA, on Jan 7Google Scholar
  21. Earnhart D, Lizal L (2006) Effects of ownership and financial performance on corporate environmental performance. J Comp Econ 34(1): 111–129CrossRefGoogle Scholar
  22. Fagin A, Jehlička P (1998) Sustainable development in the Czech Republic: a doomed process. In: Baker S, Jehlička P (eds) Dilemmas of transition: the environment, democracy, and economic reform in east Central Europe. Frank Cass, Portland, pp 113–128Google Scholar
  23. Foulon J, Lanoie P, Laplante B (2002) Incentives for pollution control: regulation or information?. J Environ Econ Manag 44(1): 169–187CrossRefGoogle Scholar
  24. Frydman R, Gray C, Hessel M, Rapaczynski A (1999) When does privatization work? The impact of private ownership on corporate performance in the transition economies. Q J Econ 114(4): 1153–1191CrossRefGoogle Scholar
  25. Gabel HL, Sinclair-DesGagné B (1993) Managerial incentives and environmental compliance. J Environ Econ Manag 24(3): 229–240CrossRefGoogle Scholar
  26. Gray W, Deily M (1996) Compliance and enforcement: air pollution regulation in the U.S. steel industry. J Environ Econ Manag 31: 96–111CrossRefGoogle Scholar
  27. Gray W, Shadbegian R (2005) When and why do plants comply? Paper mills in the 1980s. Law and Policy 27(2): 238–261CrossRefGoogle Scholar
  28. Grossman G (1995) Pollution and growth: what do we know?. In: Goldin I, Winters LA (eds) The economics of sustainable development. Cambridge University Press, NY, pp 19–46Google Scholar
  29. Hanousek J, Kocenda E, Svejnar J (2005) Origin and concentration: corporate ownership, control and performance. CERGE-EI Working Paper No. 259 MayGoogle Scholar
  30. Heckman J (1979) Sample selection bias as specification error. Econometrica 47: 153–161CrossRefGoogle Scholar
  31. Henriques I, Sadorsky P (1996) The determinants of an environmentally responsive firm: an empirical approach. J Environ Econ Manag 30: 381–395CrossRefGoogle Scholar
  32. Henriques I, Sadorsky P, Kerekes S (2005) Environmental management systems and practices: an international perspective. Presented at the OECD conference on public environmental policy and the private firm. Washington, DC, June 14–15Google Scholar
  33. Hughes G, Magda L (1999) Economic reform and environmental performance in transition economies. World Bank, Eastern Europe and Central Asia pollution management series, Technical Paper No. 446. World Bank, Washington, DCGoogle Scholar
  34. Johnstone N, Glachant M, Serravalle C, Riedinger N, Scapecchi P (2007) Many a slip twixt the cup and the lip: direct and indirect public policy incentives to improve corporate environmental performance, Chap. 3. In: Johnstone N (eds) Environmental policy and corporate behavior. Edward Elgar, CheltenhamGoogle Scholar
  35. Kahn M (2003) New evidence on Eastern Europe’s pollution progress. Topics in Economic Analysis & Policy 3(1) Article 4Google Scholar
  36. Khanna M, Damon L (1999) EPA’s voluntary 33/50 program: impact on toxic releases and economic performance of firms. J Environ Econ Manag 37(1): 1–25CrossRefGoogle Scholar
  37. Khanna M, Anton WRQ (2002) Corporate environmental management. Land Econ 78(4): 539–558CrossRefGoogle Scholar
  38. Kukla-Gryz A (2006) Decoupling environmental degradation and economic growth: estimating environmental Kuznets curves for new EU member states. Warsaw University, Warsaw Ecological Economics Center, MimeoGoogle Scholar
  39. Lizal L, Svejnar J (2002) Investment, credit rationing, and the soft budget constraint: evidence from Czech panel data. Rev Econ Stat 84(2): 353–370CrossRefGoogle Scholar
  40. Magat WA, Viscusi WK (1990) Effectiveness of the EPA’s regulatory enforcement: the case of industrial effluent standards. J Law Econ 33(2): 331–360CrossRefGoogle Scholar
  41. Nakamura M, Takahashi T, Vertinsky I (2001) Why Japanese firms choose to certify: a study of managerial responses to environmental issues. J Environ Econ Manag 42: 23–52CrossRefGoogle Scholar
  42. OECD: (1999) Environmental performance review: Czech Republic. Organization for Economic Cooperation and Development (OECD), WashingtonCrossRefGoogle Scholar
  43. OECD: (2001) Energy policies of IEA countries: Czech Republic 2001 review. International Energy Agency, Organization for Economic Cooperation and Development, ParisGoogle Scholar
  44. Pavlínek P, Pickles J (1999) Environmental change and post-communist transformations in the Czech Republic and Slovakia. Post-Soviet Geo Econ 40(5): 354–382Google Scholar
  45. Pohl G, Anderson R, Claessens S, Djankov S (1997) Privatization and restructuring in central and Eastern Europe: evidence and policy options. World Bank Technical Paper No. 368Google Scholar
  46. Prasnikar J, Svejnar J, Mihaljek D, Prasnikar V (1994) Behavior of participatory firms in Yugoslavia: lessons for transforming economies. Rev Econ Stat 76(4): 728–741CrossRefGoogle Scholar
  47. Stern D (2002) Explaining changes in global sulfur emissions: an econometric decomposition approach. Ecol Econ 42(1–2): 201–220CrossRefGoogle Scholar
  48. Talukdar D, Meisner C (2001) Does the private sector help or hurt the environment? Evidence from carbon dioxide pollution in developing countries. World Dev 29(5): 827–840CrossRefGoogle Scholar
  49. WEC: (2001) Industrial waste minimization program in central and Eastern Europe and central Asian Republics: final report. World Environment Center (WEC), New YorkGoogle Scholar
  50. Weiss A, Nikitin G (2002) Effects of ownership by investment funds on the performance of Czech firms, Chap. 10. In: Meyendorff A, Thakor A (eds) Designing financial systems in transition economies: strategies for reform in central and Eastern Europe. MIT Press, Cambridge, pp 187–214Google Scholar
  51. Wooldridge J (2002) Econometric analysis of cross section and panel data. MIT Press, CambridgeGoogle Scholar
  52. World Bank (1992) Czech and Slovak Federal Republic joint environmental study, Report No. 9623-CSGoogle Scholar

Copyright information

© Springer Science+Business Media B.V. 2010

Authors and Affiliations

  1. 1.Department of EconomicsUniversity of KansasLawrenceUSA
  2. 2.CERGE-EI (Joint Workplace of Charles University and the Academy of Sciences of the Czech Republic)PragueCzech Republic
  3. 3.William Davidson Institute (WDI)University of MichiganAnn ArborUSA
  4. 4.Centre for Economic Policy ResearchLondonUK

Personalised recommendations