ISO 14001 and Financial Performance: Is the Accreditation Financially Worth It for Malaysian Firms

AbstractIt is well known that ISO 14001 certification has been widely subscribed by various types of organizations to cope with their environmental affairs. However, what remains a puzzle is whether the ISO 14001 subscription has desirable effects on the participating firms. Such investment should only be advised if it can enhance firm's financial standing particularly for business oriented companies. Based on 17 companies certified with ISO 14001 which are listed in Malaysian Stock Exchange, this paper studies the impacts from this voluntarily action on firm financial performance through analysis of financial ratios. Three years of performance covering before and after the certification periods for selected ratios was analyzed using Paired Sample T-Test. The results show that the ISO 14001 certification does not significantly induce higher financial performance based on the perspective of firms’ asset management, profitability, leverage, liquidity and earnings per share (EPS). The finding would suggest that, the realization time for the positive impacts of the ISO 14001 certification could somehow take a much longer period