Does Environmental Responsibility Pay Off? The Conditional Roles of Firm Size and Sustainability Board Governance

Public attention to environmental responsibility has been heightened alongside the increasingly evident impacts of climate change. In response, corporations must continue to operate their businesses optimally while considering their environmental impact. This paper examines the impact of environmental responsibility on firm performance using unbalanced data from 681 companies across ASEAN-5 countries (Indonesia, Malaysia, Singapore, Thailand, and the Philippines). Our empirical investigation suggests that environmental responsibility is negatively associated with performance, both profitability and value. Further, in this paper, we documented that firm size can mitigate the adverse effect of environmental responsibility. This evidence may occur because large firms have better resources to benefit from their environmentally related investments and to create a reputation, especially in terms of firm value. We also find that the presence of a sustainability committee board in a firm can alter the negative impact of environmental responsibility on its campaign. Overall, this paper suggests that the size and sustainability of governance structures matter for firms' environmental responsibility in developing economies. Therefore, policymakers should implement different policies for firms of different sizes. Policymakers should also encourage companies to enhance their governance structures by considering the establishment of a sustainability committee.