The brown side of firm flexibility

Using a sample of 24,321 firm‐year observations from 25 countries over the 2006–2021 period, we show that operating flexibility increases carbon emissions. This increase is due to to the efficiency and instability channels. The relation is stronger for firms where expansion flexibility outweighs con...

Full description

Saved in:
Bibliographic Details
Published in:European financial management : the journal of the European Financial Management Association 2024-07
Main Authors: El Ghoul, Sadok, Guedhami, Omrane, Saadi, Samir, Sassi, Syrine
Format: Article
Language:English
Citations: Items that this one cites
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:Using a sample of 24,321 firm‐year observations from 25 countries over the 2006–2021 period, we show that operating flexibility increases carbon emissions. This increase is due to to the efficiency and instability channels. The relation is stronger for firms where expansion flexibility outweighs contraction flexibility, and for focused and financially unconstrained firms. Cross‐country analyses indicate that the effect of flexibility on carbon emissions is more prominent in developed economies with superior institutional quality. In contrast to prior studies that highlight the beneficial consequences of operating flexibility, our findings expose its adverse effect on environmental performance.
ISSN:1354-7798
1468-036X
DOI:10.1111/eufm.12495