The Effect of Environmental Regulatory Burden on the Profit Growth Rate of Philippine SMEs

• Main Author: Caboverde, Christopher Ed
• Format: text
• Published: Animo Repository 2022
• Subjects: Corruption; environmental regulation; environmental regulatory burden; governance; Philippines; SMEs
• Online Access: https://animorepository.dlsu.edu.ph/apssr/vol22/iss2/14; https://animorepository.dlsu.edu.ph/context/apssr/article/1429/viewcontent/RA_2013.pdf
• Institution: De La Salle University

Countries across the world, including the Philippines, are imposing environmental regulations in response to the negative effects of climate change. However, SMEs may have to deal with burdensome environmental regulations that may negatively affect their financial performance and competitiveness as these may increase the cost of doing business. This paper aims to test and is among the first to test the association between environmental regulatory burden and profit growth rate of Philippine SMEs using ordinary least squares (OLS) regression. This is based on a sample of 590 SMEs located in the three biggest metropolitan areas in the Philippines, namely: Metro Manila, Metro Cebu, and Metro Davao. The paper is important because Philippine SMEs contribute greatly to Philippine employment and gross value added figures and because the Philippines is among the most vulnerable countries to the consequences of climate change. Although we do not find a statistically significant association between environmental regulatory burden and profit growth rate among Philippine SMEs, we find that when SMEs perceive the extent of corruption to be low, the environmental regulatory burden may have a positive association with SME profit growth rate. Our findings also suggest that, among others, the government must strengthen the implementation of anti-corruption initiatives to help improve the ease-of-doing-business.