IFRS, financial development and pollutant emissions: an empirical analysis of developed and developing countries

Abstract

Purpose

The purpose of this study is to examine the relationship between pollutant emissions, financial development and IFRS in developed and developing countries between 1998 and 2022.

Design/methodology/approach

Data were obtained from World Development Indicators and World Governance Indicators of the World Bank.

Findings

Using FGLS and GMM estimators, the results provide evidence that financial development has a significant positive impact on a variety of pollutant emissions. However, this positive impact is moderated by IFRS for the overall sample and country income groups.

Practical implications

Governments and regulatory organizations should support companies’ investments in clean energy and technologies to slow down environmental degradation. Tax credits and subsidies may be helpful to achieve this goal. Also, governments may encourage companies to cooperate with universities and research institutions to develop environment-friendly production and distribution methods to reduce pollution. Although stakeholders may obtain information about environmental issues in financial statements that are prepared in accordance with IFRS, there is a need for standardization of their contents.

Social implications

Greenhouse gases are major contributors to climate change and global warming. In addition to private costs borne by producers, the production and consumption of products have social costs arising from pollution that affects air, water, and soil. Pollution adversely affects people's physiological and psychological health, which decreases labor productivity, thereby leading to a decrease in economic growth.

Originality/value

According to the author’s knowledge, this is the first study that examines the impact of IFRS on the relationship between financial development and pollutant emissions.

Citation

Akisik, O. (2024), "IFRS, financial development and pollutant emissions: an empirical analysis of developed and developing countries", Management of Environmental Quality, Vol. 35 No. 6, pp. 1372-1396. https://doi.org/10.1108/MEQ-08-2023-0286