Do environmental policies affect company financial performance? Evidence from the pharmaceutical and biotechnology industries

Purpose This study aims to explore how environmental policies affect financial performance in the pharmaceutical and biotechnology industries, especially given the global importance of environmental concerns in recent years. Design/methodology/approach A quantitative analysis was carried out on a sample of 638 companies from the global pharmaceutical and biotechnology industry to achieve the study’s objectives. An OLS regression model was applied to measure the impact of environmental policies, i.e. environmental innovation, emission reduction and resource use, on companies’ financial performance, measured by return on assets (ROA) and market capitalisation. Findings The empirical results show that environmental innovation is not a significant determinant of firm financial performance, whereas emission reduction and resource use have a positive and significant impact on both ROA and market capitalisation. Originality/value This study extends the literature on environmental sustainability by examining how environmental policies enhance the financial performance of companies in environmentally sensitive industries. In addition, the study provides interesting contributions for various stakeholders.