Water Sustainability and Financial Performance of Firms Listed on the Johannesburg Stock Exchange (JSE)
Keywords:
Financial Performance, Johannesburg Stock Exchange, Sustainable Development, Share Price, South Africa, Water SustainabilityAbstract
Objectives: The major purpose of this study was to examine the relationship between water sustainability and financial performance. Prior Work: Empirical research about water sustainability and financial performance is sparse in existing literature which created a research gap for this study. Approach: The study adopted a quantitate research method using secondary data. Panel data was collected for 8 years from 32 listed companies. The panel regression model was used to run the panel data. Henceforth, the Hausman test was used to select the perfect model between the fixed and random effects model, Results: The study established a significant positive relationship between water sustainability and the share price. This means that investors value firms which are actively involved in solving the water challenge in South Africa. Implications: Practically, the findings of this study can help to raise awareness among managers of listed companies that adopting proactive water strategies can eliminate water risk while positively enhancing financial performance. The findings may also shape water sustainability policies and legislation in South Africa and Value: The novelty of this study is that it produced new empirical findings on variables that have never been tested before in South Africa which can add value to the body of knowledge.
References
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Nyirenda, G., 2014. Environmental management practices and firm performance in a South African mining firm. Masters, Dissertation, University of Limpopo.
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Weber, O. and Saunders‐Hogberg, G., 2020. Corporate social responsibility, water management, and financial performance in the food and beverage industry. Corporate Social Responsibility and Environmental Management, 27(4), pp. 1937-1946.
World Health Organization (WHO), 2017. Progress on Drinking Water, Sanitation and Hygiene: 2017 Update and SDG Baselines. Geneva: World Health Organization (WHO) and the United Nations Children’sFund(UNICEF).[Online].Accessible:https://www.who.int/mediacentre/news/releases/2017/launch-version-report-jmp-water-sanitation-hygiene.pdf. Accessed on 26 February 2019.
Zamfir, A., Cristina Mocanu , C. and Grigorescu , A., 2017. Circular economy and decision models among European Firms. Sustainability, 9(9), pp. 1-15.
Zokaei, K., 2013. Environmentally-friendly business is profitable business. [Online]. Available:https://www.theguardian.com/sustainable-business/environmentally-friendly-sustainable-business-profitable. Accessed on 21 August 2018.
Amacha, E. and Dastane, O., 2017. Sustainability Practices as Determinants of Financial Performance: A Case of Malaysian Corporations. The Journal of Asian Finance, Economics and Business, 4(2), pp. 55-68.
Appiah, K., Du, J. and Boamah, K.B., 2017. The Effect of Environmental Performance on Firm’s Performance–Evidence from Ghana. British Journal of Interdisciplinary Research, 8(1), pp. 340-348.
Askham, T. M. and Van der Poll, H.M., 2017. Water Sustainability of Selected Mining Companies in South Africa. Sustainability, 9(6), pp. 1-16.
Boakye, D.J., 2018. The Relationship between Environmental Management Quality and Financial Performance of AIM listed Firms. Doctoral thesis, Bournemouth University.
Cole, M. J., Bailey, R. M., Cullis, J. D. and New, M.G., 2018. Water for sustainable development in the Berg Water Management Area, South Africa. South African Journal of Science, 114(3/4), pp. 1-10.
Cooke, T. E., 1989. Disclosure in the corporate annual reports of Swedish companies. Accounting and Business Research, 19(74), pp. 113-124.
EL-Nwsany, R. I., Maarouf, I. and el-Aal, W.A., 2019. Water management as a vital factor for a sustainable school. Alexandria Engineering Journal, 58(1), pp. 303-313.
Environmental Performance Index (EPI), 2018. Global metrics for the environment: Ranking country performance on high-priority environmental issues. [Online]. Available:https://epi.envirocenter.yale.edu/downloads/epi2018policymakerssummaryv01.pdf. Accessed on 16 July 2019.
Etikan, I., Musa, S. A. and Alkassim, R. S., 2016. Comparison of convenience sampling and purposive sampling. American Journal of Theoretical and Applied Statistics, 5(1), pp. 1-4.
EY Global, 2018. How an integrated sustainability strategy can help you stand out. [Online]. Available: https://www.ey.com/en_gl/assurance/how-an-integrated-sustainability-strategy-can-help-you-stand-out. Accessed on 20 February 2018.
Food and Agriculture Organization of the United States (FAO), 2017. Water use efficiency.[Online].Available:http://www.fao.org/fileadmin/user_upload/agwa/docs/bari2017/Session2/Efficiency_introduction_I.pdf. Accessed on 05 September 2019.
García‐Sánchez, I. M. and Martínez‐Ferrero, J., 2017. Independent directors and CSR disclosures: The moderating effects of proprietary costs. Corporate Social Responsibility and Environmental Management, 24(1), pp. 28-43.
Girmay, M.E. and Chikobvu, D., 2017. Quantifying South Africa's sulphur dioxide emission efficiency in coal-powered electricity generation by fitting the three-parameter log-logistic distribution. Journal of Energy in Southern Africa, 28(1), pp. 91-103.
Hassett, M.E. and Paavilainen-Mäntymäki, E., 2013. Handbook of longitudinal research methods in organisations and business studies. Cheltenham: Edward Elgar.
Higgs, C. (2015). Small businesses, big impact: Environmental responsibility and the small business sector. [Online]. Available: http://alive2green.com/small-business-big-impact-environmental-responsibility-small-business-sector/. [Accessed on 20 December 2017].
James, K., 2017. South Africa’s water shortage is huge risk to businesses and the economy. [Online]. Available: http://www.capetalk.co.za/articles/240440/south-africa-s-water-shortage-is-huge-risk-to-business-and-the-economy.[Accessed on 18 October 2017].
Johannesburg Stock Exchange (2020). The JSE and Sustainability. [Online]. Available: https://www.jse.co.za/about/sustainability. Accessed on 18 July 2020.
Johannesburg Stock Exchange. 2016. Setting a strong enabling framework [Online]. Available: https://www.jse.co.za/about/sustainability/regulator-influencer-advocate. Accessed on 06 June 2019.
Johnson, M. P. and Schaltegger, S., 2016. Two decades of sustainability management tools for Firms: how far have we come? Journal of Small Business Management, 54(2), pp. 481-505.
Kurunthachalam, S.K., 2014. Water conservation and sustainability: an utmost importance. Hydrology: Current Research, 5(2), pp. 1-3.
Linneman, M.H., Hoekstra, A.Y. and Berkhout, W., 2015. Ranking Water Transparency of Dutch Stock-Listed Companies. Sustainability, 7, 4341-4359.
Manrique, S. and Martí-Ballester, C.P., 2017. Analyzing the Effect of Corporate Environmental Performance on Corporate Financial Performance in Developed and Developing Countries. Sustainability, 9, 1-30.
Mans-Kemp, N., 2014. Corporate governance and the financial performance of selected Johannesburg Stock Exchange industries. Doctoral dissertation, Stellenbosch University.
Maphela, B. and Cloete, F., 2019. Johannesburg’s implementation of the National Water Act, 1998 in Soweto, South Africa. Development Southern Africa, 1-18.
Mckinsey and Company (2019). The business opportunity in water conservation. [Online]. Available:https://www.mckinsey.com/business-functions/sustainability/our-insights/the-business-opportunity-in-water-conservation# . Accessed on 05 September 2019.
Milkias, A., Tadesse, T. and Zeleke, H., 2018. Evaluating the effects of in-situ rainwater harvesting techniques on soil moisture conservation and grain yield of maize (Zea mays L.) in Fedis district, Eastern Hararghe, Ethiopia. Turkish Journal of Agriculture-Food Science and Technology, 6(9), 1129-1133.
Nguyen, T., 2016. Small and medium-sized enterprises and sustainable development: The case of Vietnam, Doctor of Philosophy (PhD), Management, RMIT University.
Nyirenda, G., 2014. Environmental management practices and firm performance in a South African mining firm. Masters, Dissertation, University of Limpopo.
Ong, T., Teh, B. and Ang, Y., 2014. The Impact of Environmental Improvements on the Financial Performance of Leading Companies Listed in Bursa Malaysia. International Journal of Trade, Economics and Finance, 5(5), pp. 386-391.
Pedace, R., 2013. Econometrics for dummies. Hoboken, NJ: Wiley.
Piesse, M., 2016. South Africa: Drought Threatens Food, Energy and Water Security 2016. Available online: http://www.futuredirections.org.au/wp- content/uploads/2016/03/South-Africa-Drought-ThreatensFood-Energy-and- Water-Security.pdf (Accessed on 25 April 2018).
Raj, A., 2015. The relation between corporate water risk, water accounting and financial performance of metal mining firms. Masters dissertation, University of Waterloo, Canada.
Richards, T., 2018. Government warns SA will run out of water by 2030. [Online]. Available: https://www.msn.com/en-za/weather/topstories/government-warns-sa-will-run-out-of-water-by-2030/ar-BBMTeQ8?li=BBqg6Q6&ocid=wispr. Accessed on 23 September 2018.
Sánchez-Hernández, M. I., Robina-Ramírez, R. and De Clercq, W., 2017. Water management reporting in the Agro-Food sector in South Africa. Water, 9(11), pp. 1-20.
Schreiner, B., 2013. Viewpoint—Why has the South African National Water Act been so difficult to implement. Water Alternatives, 6(2), pp. 239-245.
Snorrason, S.T., 2012. Asymmetric economic integration: Size characteristics of economies, trade costs and welfare. Heidelberg: Springer-Verlag.
South African Department of Water Affairs (DWA), 2013. National Water Resource Strategy June 2013. 2nd edition. Pretoria: DWA.
Tasneem, F., Hamza, S.M. and Basit, A., 2016. The Impact of Environmental Reporting on Firms’ Performance. International Journal of Accounting & Business Management, 4(2), pp. 275-301.
The United Nations World Water Development Report, 2016. Water and jobs. [Online]. Available: http://unesdoc.unesco.org/images/0024/002439/243938e.pdf. Accessed on 20 June 2018.
Tolossa, T. T., Abebe, F. B. and Girma, A. A., 2020. Rainwater harvesting technology practices and implication of climate change characteristics in Eastern Ethiopia. Cogent Food & Agriculture, 6(1), pp. 1-11.
Tortajada, C. and Nambiar, S., 2019. Communications on Technological Innovations: Potable Water Reuse. Water, 11(2), pp. 1-15.
Tortajada, C., 2020. Contributions of recycled wastewater to clean water and sanitation Sustainable Development Goals. npj Clean Water, 3(1), pp. 1-6.
United Nations International Children's Emergency Fund (UNICEF), 2017. Water, Sanitation and Hygiene. [Online]. Available: https://www.unicef.org/wash/. Accessed on 17 November 2019.
United Nations World Water Assessment Programme, 2016. The United Nations World Water development report 2016: Water and jobs. Paris: UNESCO. [Online]. Available:http://www.unesco.org/new/en/naturalsciences/environment/water/wwap/wwdr/2016-water-and-jobs/. Accessed on 12 September 2019.
United States Environmental Protection Agency, 2019. Water Sense. [Online]. Available: https://www.epa.gov/watersense/statistics-and-facts. Accessed on 05 September 2019.
UN–United Nation. Sustainable Development Goals, United Nations, 2015. [Online]. Available: https: //sustainabledevelopment.un.org/?menu=1300. Accessed on 05 September 2019.
van Zyl, A. and Jooste, J. L., 2020. Retaining and recycling water to address water scarcity in the City of Cape Town. Development Southern Africa, pp. 1-18.
Warrad, L. H. and Oqdeh, S. K., 2018. Do Liquidity and Firm Size Affect Profitability and Does Capital Structure Play a Moderator Role: Study Based on Jordanian Data. International Research Journal of Finance and Economics, (170), pp. 27-40.
Weber, O. and Saunders‐Hogberg, G., 2020. Corporate social responsibility, water management, and financial performance in the food and beverage industry. Corporate Social Responsibility and Environmental Management, 27(4), pp. 1937-1946.
World Health Organization (WHO), 2017. Progress on Drinking Water, Sanitation and Hygiene: 2017 Update and SDG Baselines. Geneva: World Health Organization (WHO) and the United Nations Children’sFund(UNICEF).[Online].Accessible:https://www.who.int/mediacentre/news/releases/2017/launch-version-report-jmp-water-sanitation-hygiene.pdf. Accessed on 26 February 2019.
Zamfir, A., Cristina Mocanu , C. and Grigorescu , A., 2017. Circular economy and decision models among European Firms. Sustainability, 9(9), pp. 1-15.
Zokaei, K., 2013. Environmentally-friendly business is profitable business. [Online]. Available:https://www.theguardian.com/sustainable-business/environmentally-friendly-sustainable-business-profitable. Accessed on 21 August 2018.
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Published
2021-04-09
How to Cite
Dzomonda, O., & Fatoki, O. . (2021). Water Sustainability and Financial Performance of Firms Listed on the Johannesburg Stock Exchange (JSE): Array. Acta Universitatis Danubius. Œconomica, 17(3). Retrieved from https://dj.univ-danubius.ro/index.php/AUDOE/article/view/845
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Business Administration and Business Economics
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