The Impact of Resource Efficiency Actions and Firm Performance, Moderating Role of

Eco-Investment and Production Cost

By

Muhammad Faisal

PAF05181024

A Thesis Presented to the

DEANSHIP OF GRADUATE STUDIES & RESEARCH

THE UNIVERSITY OF LAHORE

LAHORE, PAKISTAN

In Partial Fulfillment of the

Requirement for the Degree of MPhil

In

Finance
 TABLE OF CONTENTS

ABSTRACT i

APPROVAL PAGE ii

DECLARATION PAGE iii

ACKNOWLEDGMENT iv

LIST OF TABLES v

LIST OF FIGURES vi

1 CHAPTER NO. 01 01

1.0 Introduction 02

1.1 Significance of Firm Performance 02

1.2 Importance of Resource Efficiency Actions 03

1.3 Relationship of Resource Efficiency Actions and Firm Performance 04

1.4 Tendency of Eco-Investment 06

1.5 Phenomenon of Production Cost 07

1.6 Consequences of SMEs Sector 08

1.7 Background of Study 10

1.8 Importance of Study 11

1.9 Survey for Identification of Resource Efficiency Actions 11

1.10 Statement of Problem 12

1.11 Contributions of Study 13

1.11.1 Theoretical Contributions 13

1.11.2 Practical Contributions 14

1.12 Research Questions 14

1.13 Research Objectives 14

1.14 Research Limitations 15

2.0 Literature Review and Developing Hypothesis 16

2.1 Hypothesis 1 (H1) 32

2.2 Hypothesis 2 (H2) 32

2.3 Hypothesis 3 (H3) 33

2.4 Literature Summary 33

3 CHAPTER NO. 03 35

3.0 Methodology 36

3.1 Conceptual Framework 36

3.1.1 Model No. 01 36

3.1.2 Model No. 02 37

3.2 Definitions of Various Terminologies 38

3.2.1 Firm Performance 38

3.2.2 Resource Efficiency Actions 39

3.2.3 Small and Medium Size Enterprises 39

3.2.4 Green Product and Services 39

3.3 Source of Data 40

3.4 Time Frame and Data Type 40

3.4.1 Time Frame 41

3.4.2 Data Type 41

3.5 Sampling Method or Data Source 41

3.6 Type of Questionnaire (Structured and Closed Ended) 42

3.7 Research Approach 42

3.8 Variables 42

3.8.1 Dependant Variable 43

3.8.2.1 Saving the Water 43

3.8.2.2 Saving the Energy 44

3.8.2.3 Renewable Energy 44

3.8.2.4 Saving the Material 45

3.8.2.5 Minimizing the Waste45

3.8.2.6 Selling Scrap Material to Another Company 46

3.8.2.7 Recycling 46

3.8.3 Moderating Variables 47

3.8.3.1 Eco-Investment 47

3.8.3.2 Production Cost 48

3.8.4 Controlled Variable 48

3.8.4.1 Firm Characteristics 49

3.8.5 Measurement and Statistical Tools 49

3.8.5.1 Descriptive Statistics 49

3.8.5.2 Correlation Analysis 49

3.8.5.3 Regression Analysis 50

3.8.5.4 Ordinal Regression Analysis 50

3.8.5.5 Moderated Ordinal Regression Analysis 51

3.8.5.6 Multiple Moderated Ordinal Regression Analysis 51

3.8.5.7 MS Excel and SPSS 51

4 CHAPTER NO. 4 52

4.0 Results53

4.1 Descriptive Statistics 53

4.1.1 Does your company offer green products or services? 53

4.1.3 The small and medium size enterprise (SME) belong to following sector 54

4.1.4 The size of small and medium size enterprise (SME) 55

4.1.5 In which year small and medium size enterprise (SME) was established 56

4.1.6 Over the past two years, has your company's annual turnover increased,

decreased or remained unchanged? 57

4.1.7 What was your turnover last year? 58

4.1.8 To whom your company is selling its products or services? 59

4.1.9 What actions is your company undertaking to be more resource efficient? 59

4.1.10 Your Company involves in following number of resource efficiency actions

61

4.1.11 Over the next two years, what is the additional resource efficiency actions

that your company is planning to implement? 61

4.1.12 What are the main reasons why your company is taking actions to be more

resource efficient? 62

4.1.13 What impact has the undertaken resource efficiency actions had on the

production costs over the past two years? The production costs have 63

4.1.14 Over the past two years, how much have you invested on average per year to

be more 64

4.1.15 Overall, how satisfied or dissatisfied are you with the return on the

investments you 65

4.1.16 Which type of support does your company rely on in its efforts to be more

resource efficient? 66

4.2 Correlation Analysis 67

4.2.2 Annual Turnover and Production Cost 68

4.2.3 Annual Turnover and Eco-Investment 68

4.2.4 Eco-Investment and Production Cost 69

4.3 Assumptions of Ordinal Regression Analysis 69

4.3.1 Multicollinearity …...70

4.3.2 Proportional Odds 70

4.4 Ordinal Regression Analysis 71

4.4.1 Test of Pseudo R-Squared 71

4.4.2 Relationship of Annual Turnover and Resource Efficiency Actions 71

4.4.3 Relationship of Annual Turnover and Number of Eco-Efficiency Actions 73

4.4.4 Relationship of Firm Size and Annual Turnover 73

4.5 Moderated Ordinal Regression Analysis 74

4.5.1 Relationship of Production Cost and Annual Turnover 74

4.5.2 Relationship of Eco-Investment and Annual Turnover 75

4.6 Relationship of Satisfaction Level and Annual Turnover 76

4.7 Multiple Moderated Ordinal Regression Analysis 77

4.7.1 Relationship of Turnover with Production Cost and Eco-Investment 77

5. CHAPTER NO. 5 79

5.1 SUMMARY 80

5.2 CONCLUSION 81

5.3 IMPLICATIONS 82

REFERENCES 83

APPENDICES 87
 ABSTRACT

The impact of resource efficiency actions on firm performance has been assessed under the context

of small and medium size enterprises (SMEs) belonged to the sector of iron and steel

manufacturing located around countryside of Lahore. The data of ninety (90) firms has been

gathered by questionnaires and analyzed through SPSS by executing some statistical and

econometric techniques. The dependant variable is firm performance (annual turnover) and

different resource efficiency actions are the independent variables whereas the eco-investment and

production cost have been considered the moderating variables. The primary intentions were to

examine the impact of eco-efficiency actions on the annual turnover of SMEs whether it is

positively or negatively linked with each other. In addition, the moderating role of eco-investment

and production cost have also been evaluated. The five chapters covered this discussion and the

introduction has been presented in the first chapter. The second chapter consists of literature review

and prior research studies. In third chapter, the methodology has been furnished which is followed

by the fourth chapter of results. The fifth chapter elaborates the summary, conclusion and

implications. The results are somehow positive and negative, supporting the both theories which

state that there is a positive or negative relationship between eco-efficiency actions and firm

performance and contrary to this view, there is no relationship between these both.

i
 CERTIFICATE OF APPROVAL

This is to certify that research work presented in the thesis, entitled “The Impact of Resource

Efficiency Actions on Firm Performance, Moderating Role of Eco-Investment and Production

Cost” was conducted by Mr. Muhammad Faisal under the supervision of Dr. Salman Riaz.

No part of the thesis has been submitted anywhere else for any other degree. This thesis is

submitted to the Lahore School of Accountancy & Finance in partial fulfillment of requirement for

the degree of Master of Philosophy in the field of Accountancy & Finance, School of Accountancy

& Finance, and the University of Lahore.

Official Name of the Student: Muhammad Faisal Signature: __________________________

Examination Committee:

a) External Examiner 1:
Dr. Signature: __________________________
Designation: Assistant Professor
Affiliation Lahore, Pakistan
b) Dr.
Designation: Assistant Professor Signature: __________________________
School of Accountancy and
Finance, the University of
Lahore: Pakistan.

Supervisor Name: Dr. Salman Riaz Signature: __________________________

Dean, School of Accountancy Name and Signature: __________________________

Research Head, School of Accountancy Name and Signature: __________________________

Internal Examination Department Head Name and Signature: __________________________

ii
 The University of Lahore: Pakistan

School of Accountancy and Finance

Office of the Dean of Graduate Studies and Research

This thesis is written by Muhammad Faisal, Registration No.: PAF05181024, under the

directions of his advisor and approved by his thesis committee, has been presented to and

accepted by the Dean of Graduate studies and research, in partial fulfillment of the requirement

for the degree of MPhil in Accounting & Finance.

_______________
Thesis Committee

_____________
Thesis Advisor

_______________________
Thesis Co-advisor/Member

_____________
Thesis/Member

_________________
Head of Department
_____________
Thesis/Member

_____________
Thesis/Member

_______________________________
Dean Graduate Studies and Research

Dated:
iii
 ACHNOWLEDGEMENT

I pay my profound gratitude to Allah the almighty who bestowed His countless blessings to

empower me for completion of the piece of this research work. Without His kind permission,

nothing can be happened and nobody can be able to even blink his eyelashes. I bend over the head

of my countless praise and bow the forehead of endless honor to appreciate the blessings of our
‫هَّٰلل‬
extremely honorable beloved Prophet Mohammad-ur-Rasoolullah ( ‫صلَّ ٰى‬
َ ُ ‫ ) َو َسلَّ َم َوآلِ ِه َعلَ ْي ِه ٱ‬since He is

the one and only absolute leader whose kind directions can lead for the eternal success, here and

hereafter.

I am deepened in debt to my beloved parents who always remained compassionate to me and

whose sympathetic prayers outburst the castles of enormous hurdles of my life till their destruction.

Furthermore, I am obliged to my wife and children who sacrificed a number of important matters of

their personal lives in order to make me liberated and relaxed. As a result, I would have been able

to attain the goals of this milestone to continue the journey of my higher studies ahead.

I am highly thankful to my research supervisor, Dr. Salman Riaz and acknowledge his valuable

guidance which showed me the appropriate directions to achieve my motive. Since I was not

properly aware of research activities along with its relevant paradigm to initiate the investigation

but the kind guidelines of my supervisor enlightened the entire road map from beginning to the end

and made me complete this important task within due course of time. I am also thankful to my class

fellows (especially Mr. Adeel Ahmad Azeemi) who has always been very helpful throughout the

entire journey of MPhil (Accounting and Finance), from beginning to the end. I hereby wish all of

them a very best of luck and prosperous career ahead.

iv
 LIST OF TABLES

Table No. Page No. Table No. Page No.

2.1 57 2.17 72

2.2 58 2.18 72

2.3 59 2.19 73

2.4 59 2.20 74

2.5 62 2.21 75

2.6 62 2.22 76

2.7 63 2.23 76

2.8 63 2.24 77

2.9 64 2.25 78

2.10 65 2.26 79

2.11 66 2.27 79

2.12 67 2.28 80

2.13 68 2.29 81

2.14 69 2.30 81

2.15 70 2.31 82

2.16 71 2.32 83

v
 LIST OF FIGURES

Table No. Page No. Table No. Page No.

1.1 39 1.5 68

1.2 40 1.6 69

1.3 61 1.7 71

1.4 62 - -

vi