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The Economic Value of Corporate Eco-Efficiency

Rob Bauer
Maastricht University

Jeroen Derwall
Tilburg University, School of Economics; European Centre for Corporate Engagement; Maastricht University

Nadja Guenster
Maastricht University, Department of Finance; Erasmus University Rotterdam (EUR) - Department of Financial Management

Kees C. G. Koedijk
Tilburg University - Department of Finance

August 2006

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: Corporate Social Responsibility, Eco-Efficiency, Shareholder value, Firm Value, Firm Operating Performance, Management Policies, Capital Markets

JEL Classifications: G12, G14, G23, M14

Working Paper Series

Date posted: February 28, 2005 ; Last revised: November 04, 2006

Suggested Citation

Bauer, Rob, Guenster, Nadja, Derwall, Jeroen and Koedijk, Kees C. G., The Economic Value of Corporate Eco-Efficiency (August 2006). Available at SSRN: http://ssrn.com/abstract=675628

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Contact Information

Nadja Guenster (Contact Author) Maastricht University, Department of Finance ( email ) P.O. Box 616 6200 MD Maastricht 6200MD Netherlands +31-43-3883838 (Phone)
Erasmus University Rotterdam (EUR) - Department of Financial Management ( email ) P.O. Box 1738 Room T09-25 3000 DR Rotterdam Netherlands +31 10 4082790 (Phone)
Rob Bauer Maastricht University ( email ) P.O. Box 616 6200 MD Maastricht Netherlands +31 43 3883871 (Phone)
Jeroen Derwall Tilburg University, School of Economics ( email ) P.O. Box 90153 NL-5000 LE Tilburg, Brabant Netherlands HOME PAGE: http://www.tilburguniversity.nl/webwijs/show/?uid=j.m.m.derwall
European Centre for Corporate Engagement FEBA Tongersestraat 53 Maastricht, Limburg 6200MD Netherlands HOME PAGE: http://www.corporate-engagement.com/
Maastricht University ( email ) Maastricht 6200 MD Netherlands HOME PAGE: http://www.fdewb.unimaas.nl/finance/?page=member&id=175
Kees G. Koedijk Tilburg University - Department of Finance ( email ) P.O. Box 90153 5000 LE Tilburg Netherlands +31 13 4663048 (Phone) +31 13 4662052 (Fax)