International Journal of Business and Social Science

ISSN 2219-1933 (Print), 2219-6021 (Online) DOI: 10.30845/ijbss

Why Do Firms Invest in Capital Expenditures? Evidence from Environmental Activities
Barri Litt

Capital expenditures comprise one of the largest and riskiest accounts in corporate financial statements. An understanding of motivators for capital investment decisions is valuable for investors, regulators, auditors, and the public at large. I provide empirical evidence of environmental activities as one such motivator. This analysis is participatory important given the unprecedented attention to environmental accountability in today’s business world. Using a sample of 2,474 observations from US firms from 2004 to 2006, I find that firms engaged in environmental activities report significantly higher capital expenditures than those that do not. I also independently examine various types of environmental activities and find consistent results. My findings support environmental initiative participation as a driver of firm capital investment, and I discuss the implications of these findings for various stakeholders.

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