Voluntary Corporate Environmental Initiatives and Shareholder Wealth

51 Pages Posted: 20 Jun 2010

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: June 14, 2010


Researchers debate whether environmental investments reduce firm value or actually improve financial performance. We provide some compelling evidence on shareholder wealth effects of membership in voluntary environmental programs (VEPs). Companies announcing membership in EPA’s Climate Leaders, a program targeting reductions in greenhouse gas emissions, experience significantly negative abnormal stock returns. The price decline is larger in firms with poor corporate governance structures, and for high market-to-book (i.e., high growth) firms. However, firms joining Ceres, a program involving more general environmental commitments, have insignificant announcement returns, as do portfolios of industry rivals. Overall, corporate commitments to reduce greenhouse gas emissions appear to conflict with firm value-maximization. This has important implications for policies that rely on voluntary initiatives to address climate change. Further, we find that firms tend to join Climate Leaders either in response to climate-related shareholder resolutions or due to weak corporate governance standards which give managers the discretion to make such voluntary environmentally responsible investment decisions — decisions that may result in lower firm value.

Keywords: Corporate social responsibility, Environmentally responsible investing, Climate change, Greenhouse gas emissions, Capital expenditures, Shareholder wealth

JEL Classification: Q5, G31, G38

Suggested Citation

Fisher-Vanden, Karen and Thorburn, Karin S., Voluntary Corporate Environmental Initiatives and Shareholder Wealth (June 14, 2010). Available at SSRN: https://ssrn.com/abstract=1324983 or http://dx.doi.org/10.2139/ssrn.1324983

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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