Voluntary Corporate Environmental Initiatives and Shareholder Wealth

42 Pages Posted: 9 Jun 2008

See all articles by Karen Fisher-Vanden

Karen Fisher-Vanden

Dartmouth College

Karin S. Thorburn

Norwegian School of Economics; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Multiple version iconThere are 2 versions of this paper

Date Written: February 2008


Researchers debate whether environmental investments reduce firm value or can actually improve financial performance. We provide some first evidence on shareholder wealth effects of voluntary corporate environmental initiatives. Companies announcing membership in Climate Leaders and Ceres - two voluntary environmental programs related to climate change - experience significantly negative abnormal stock returns. The price decline is smaller in carbon-intensive industries, where regulatory actions are more likely, and for high book-to-market firms, suggesting that "green" expenditures crowd out growth-related investments. We also document insignificant announcement returns for portfolios of industry rivals. Overall, the environmental investments appear to conflict with shareholder value-maximization. This has far reaching implications since the U.S. government relies on voluntary initiatives to reduce the emissions of greenhouse gases.

Keywords: capital expenditures, climate change, corporate social responsibility, environmentally responsible investing, shareholder wealth

JEL Classification: G31, G38, Q5

Suggested Citation

Fisher-Vanden, Karen and Thorburn, Karin S., Voluntary Corporate Environmental Initiatives and Shareholder Wealth (February 2008). CEPR Discussion Paper No. DP6698, Available at SSRN: https://ssrn.com/abstract=1141020

Karen Fisher-Vanden

Dartmouth College ( email )

Department of Sociology
Hanover, NH 03755
United States

Karin S. Thorburn (Contact Author)

Norwegian School of Economics ( email )

Helleveien 30
N-5045 Bergen
+4755959283 (Phone)

HOME PAGE: http://www.nhh.no/cv/thorburn

Centre for Economic Policy Research (CEPR)

United Kingdom

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

HOME PAGE: http://www.ecgi.org

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