Campus Services
Maharishi Vedic Science


Zhao, Jiangning
The effect of the ISO-14001 environmental management system on corporate financial performance

Order No. 9605337

This study employed a quasi-experimental design to compare the experimental group (ISO companies) with the matched control group (non-ISO companies) on the effect of ISO-14001 registration (independent variable) on financial performance (three dependent variables): return on revenue (ROR), return on assets (ROA), and operating revenue (OPR).

This study also examined the effects of early adoption, length of registration, and size of companies on the relationship between ISO registration and financial performance.

The distribution of data on ISO registration indicated that industries with higher level of resources consumption, or industries with higher levels of pollution (i.e., auto industry 8.88%, chemical industry 8.41%, machinery industry 7.01%, and semiconductors industry 6.54%) were more likely to register for ISO-14001.

The experimental group (ISO companies) consisted of the 81 companies from the S&P large cap, mid cap, and small cap indices, which had at least one ISO certificate and for whom at least five years of financial data were available.

This study employed analysis of covariance (ANCOVA) as the main tool for statistical analysis. Baseline financial data of two years before registration (T - 2) was used to adjust change scores between T - 2 and T + 2. In addition, because of the violation of equal slope on OPR (for T + 2: F=2.2477, F*=1.9751), multiple analyses of variance (MANOVA) and analysis of variance (ANOVA) were also used.

Statistical analyses indicated that registration of ISO-14001 EMS led to lower ROR (p=0.012, N=162, α=0.05); lower ROA (p=0.041, N=162, α=0.05), and no change in OPR (p=0.3689, N=162, α=0.05). Early adoption, length of ISO registration, and size of company did not affect the relationship of ISO registration and financial performance.

It appears that implementation of ISO-14001 introduced expenses and inefficiency during the period studied. Further research is suggested for more in depth investigation on the quality of implementation of ISO-14001 EMS, rather than a simple test of the adoption. A model is presented proposing that when EMS is supported by environmental awareness, it will be integrated in business management in a way that can have triple-bottom-line impacts.


search login