Corporate Social Responsibility and Shareholder Value: The Environmental Consciousness of Investors

29 Pages Posted: 20 Jul 2011  

Caroline Flammer

Boston University

Date Written: July 18, 2011

Abstract

This study examines whether shareholders are sensitive to corporations' environmental footprint. Specifically, we conduct an event study around the announcement of corporate news related to environment for all U.S. publicly-traded companies from 1980 to 2009. We find that companies that are reported to behave responsibly towards the environment experience a significant stock price increase, whereas firms that behave irresponsibly face a significant stock price decrease. When we examine how the stock market reaction has evolved over the past three decades, we find that punishment for corporate irresponsible behavior has increased, while the reward for responsible behavior has decreased. These results indicate that, over time, shareholders have become more conscious of the environment and also more demanding towards companies' environmental responsibility.

Keywords: corporate social responsibility, shareholder value, event study, environment

JEL Classification: M14, G14, Q2

Suggested Citation

Flammer, Caroline, Corporate Social Responsibility and Shareholder Value: The Environmental Consciousness of Investors (July 18, 2011). Available at SSRN: https://ssrn.com/abstract=1888742 or http://dx.doi.org/10.2139/ssrn.1888742

Caroline Flammer (Contact Author)

Boston University ( email )

Boston University Questrom School of Business
595 Commonwealth Avenue, Office 634A
Boston, MA 02215
United States

HOME PAGE: http://sites.bu.edu/cflammer/

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