Effect of pollution control on corporate financial performance in a transition economy

This study analyzes the effect of pollution control on corporate financial performance in a transition economy. In particular, it assesses whether better pollution control, as measured by lower air pollutant emissions, improves or undermines financial success, as captured by accounting‐based measures of financial performance, e.g. profitability. For this assessment, this study analyzes the effect of air pollution control using a panel of Czech firms for the years 1996–1998. The analytical results indicate that better pollution control neither improves nor undermines financial success. These results provide no support for the hypothesis that pollution prevention, generated by improved production processes, led to lower costs, and thus, greater profitability.