Abstract
Abstract Industrial pollution is a big concern in many manufacturing sectors including textile sector. Recently, voluntary actions for environmental protection have gained their importance. Eco-labeling is one of the most important schemes of voluntary environmental actions and has been recognized as an effective measure to reduce industrial pollution. This paper analyzes the effect of eco-labels on the textile firms’ environmental and financial performance. Three stage least squares regression is applied using data from 128 firms listed in Pakistan Stock Exchange. Results reveal that eco-labels have a significant positive effect on textile firms’ environmental and financial performance. This indicates that eco-labels promote the sustainable growth of textile firms. Furthermore, financial performance, material cost, and age have a significant positive effect on the environmental performance of textile firms whereas machinery and size have a significant negative effect on the environmental performance. Likewise, debt-equity ratio and size of the firm have a significant positive effect on the financial performance of the textile firms wheras the environmental performance, machinery, and age of the firms have a significant negative effect on the financial performance.
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