Doctor of Philosophy
School of Accounting, Economics and Finance
The Australian electricity sector currently accounts for around one third of Australia’s emissions and is the largest single source of emission in the country (ACIL Allen Consulting, 2015). Given this, unsurprisingly there has been a significant interest in the way electricity manufactures are attempting to improve their environmental performance. This study develops and presents a structural equation model to show the structural relationship between key variables that contribute to the environmental performance, financial performance and market performance of Australian electricity producers. The study then empirically test the model with a view to examine: (1) the relationship between firm efficiency, internal operations and the environmental performance, (2) the relationship between the firm efficiency and financial performance, (3) the relationship between the environmental performance and financial performance, (4) the impact environmental standards have on the relationship between the environmental performance and financial performance, (5) the relationship between the financial performance and market performance, and (6) the relationship between environmental performance of firms and their financial performance in different geographical regions. The data for this study was drawn from 13 Australian electricity producing companies for the period from 2006 to 2017.
The structural model built to examine the relationship between the environmental performance, financial performance and market performance of Australian electricity producers incorporated firm efficiency as a latent variable which was measured using Data Envelopment Analysis (DEA) and fitted into the model through reflective measures of technical efficiency, scale efficiency and allocative efficiency. The other key latent variables used in the model were: Internal Operation (reflected by size, risk, retention ratio and technology indicators), Environmental Performance (reflected by indictors of firms’ 5-year environmental performance), Financial Performance (reflected by return on assets, return on equity, gross profit margin and net profit margin indicators), Market Performance (reflected by the market indicator of price-earnings ratio), Environmental Standards (reflected by the dummy variable of firms’ following environmental standards) and Reginal Dummy (reflected by dummy variable of region of firms’ operation). In building this model, the study utilised the theoretical underpinning of three key theories: Resource based view (RBV), stakeholder theory, and Legitimacy theory.
The results of the study showed that firm efficiency is a significant factor that had assisted firms in enhancing their environmental performance directly as well as indirectly through the mediating effect of internal operations ...
Forughi, Shima, Determinants of Environmental and Financial Performance of the Australian Electricity Generating Firms: A Structural Equation Modelling (SEM) Approach, Doctor of Philosophy thesis, School of Accounting, Economics and Finance, University of Wollongong, 2019. https://ro.uow.edu.au/theses1/788
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Unless otherwise indicated, the views expressed in this thesis are those of the author and do not necessarily represent the views of the University of Wollongong.