ISO Certification and Financial Analysis: Empirical Analysis from Pakistan and India

Abstract

Over the past many years several studies portray the environmental management system certifications can be used as a potential tool to increase the green environmental activities and reduce negative hazardous impact of hike in industrialization as well as boost the financial performance of certified firms. As far as the financial aspect is concerned there is still ambiguity about the exact impact. This study is aiming to understand the relation between financial performance and debt cost for ISO 14001 certified companies and uncertified companies. Data of Pakistani and Indian listed companies is extracted and through regression tests it is analyzed. The study proposes that for Pakistani and Indian certified listed companies the debt cost declines with increasing financial performance and vice versa. The results from empirical analysis partially support the hypothesis presented and gives mixed results. This study is among one of the first research to conduct an empirical analysis for Pakistan and India and link financial performance with cost of debt while taking ISO 14001 into consideration. The result of this study has both theoretical and practical significance because it adds valuable data to theoretical framework and encourages organizations in both the sample countries to attain ISO 14001 certification.