Is profit sharing good for the environment? Positive evidence from French firms

Abstract

PurposeThe purpose of this paper is to look at the effect of profit sharing (PS) on the ability of the firm to take care of the environment.Design/methodology/approachIn a large cross-section of French firms, the authors find strong associations between PS and various innovations with environmental benefits. With cross-sectional data from the Community Innovation Survey and FARE, the authors estimate simultaneous equations for these effects, with endogenous PS.FindingsThis relationship between PS and environmental innovation is plausible, since workers benefit more than outside owners from a better local environment. To the best of the authors’ knowledge, this paper provides the first empirical evidence, so the results suggest PS supports environmental policy, in addition to its other, better known incentive benefits.Research limitations/implicationsFurther studies, using panel data, are needed.Practical implicationsFinancial participation may be considered as an additional tool to protect the environment.Originality/valueThis is the first paper looking at the impact of PS on the ability of the firm to take care of the environment. In this critical period when policy makers are searching for ways to limit global warming and protect the environment, the authors have presented here the first evidence that financial participation helps to support these policies.