The Economic Value of Corporate Eco-Efficiency
- 1 August 2006
- preprint
- Published by Elsevier BV in SSRN Electronic Journal
Abstract
This study adds new insights to the long-running corporate environmental-financial performance debate by focusing on the concept of eco-efficiency. Using a new database of eco-efficiency ratings, we analyze the relation between eco-efficiency and financial performance from 1997 to 2004. We report that eco-efficiency relates positively to operating performance and market value. Moreover, our results suggest that the market's valuation of environmental performance has been time variant, which may indicate that the market incorporates environmental information with a drift. Although environmental leaders initially did not sell at a premium relative to laggards, the valuation differential increased significantly over time. Our results have implications for company managers, who evidently do not have to overcome a tradeoff between eco-efficiency and financial performance, and for investors, who can exploit environmental information for investment decisions.Keywords
This publication has 41 references indexed in Scilit:
- The Eco-Efficiency Premium PuzzleCFA Magazine, 2005
- Do Corporate Global Environmental Standards Create or Destroy Market Value?Management Science, 2000
- Changes in the value-relevance of earnings and book values over the past forty yearsJournal of Accounting and Economics, 1997
- Detecting abnormal operating performance: The empirical power and specification of test statisticsJournal of Financial Economics, 1996
- A Simple Approximation of Tobin's qFinancial Management, 1994
- Common risk factors in the returns on stocks and bondsJournal of Financial Economics, 1993
- Corporate Social Responsibility and Stock Market PerformanceThe Academy of Management Journal, 1978
- A Strategic Posture toward Corporate Social ResponsibilityCalifornia Management Review, 1975
- The Case for and Against Business Assumption of Social ResponsibilitiesThe Academy of Management Journal, 1973
- Risk, Return, and Equilibrium: Empirical TestsJournal of Political Economy, 1973