The Economic Value of Corporate Eco-Efficiency
University of Muenster - Finance Center Muenster; Erasmus University Rotterdam (EUR) - Department of Financial Management
Maastricht University - European Centre for Corporate Engagement; Tilburg University - School of Economics; Maastricht University - Department of Finance
Kees C. G. Koedijk
Tilburg University - Department of Finance
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.
Number of Pages in PDF File: 34
Keywords: Corporate Social Responsibility, Eco-Efficiency, Shareholder value, Firm Value, Firm Operating Performance, Management Policies, Capital Markets
JEL Classification: G12, G14, G23, M14
Date posted: February 28, 2005
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