This study aims to examine whether salience towards natural environment influences the corporate responsibility towards natural environment. It further aims to test whether the corporate responsibility towards environment impacts the financial performance of firms.
The sample comprises 150 listed and non‐listed Indian manufacturing companies. Salience and corporate responsibility towards environment were assessed with the help of standard instruments and the data on financial performance of companies were procured from secondary sources. The study used hybrid models to analyze the data. In the measurement model, the convergent validity of salience and corporate responsibility towards natural environment were ascertained through confirmatory factor analysis. In the structural model, the hypotheses were tested.
Controlling the confounding effects of listing status of companies in stock exchanges, findings suggest that higher the salience of the environment, the more favorable is the corporate responsibility towards the environment. The favorable corporate responsibility towards environment increases the financial performance of firms.
By according salience to the natural environment and adopting responsible environment practices, Indian companies can improve their financial performance.
This study is the first of its kind in India to establish the link among salience of natural environment, corporate responsibility towards natural environment, and financial performance of firms. It reveals that salience accorded to natural environment leads to responsible business practices with respect to the environment that boosts the bottom line of firms.
