The Economic Value of Corporate Eco‐Efficiency

26 Pages Posted: 17 Aug 2011  

Nadja Guenster

University of Muenster - Finance Center Muenster; University of California, Berkeley

Rob Bauer

Maastricht University

Jeroen Derwall

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

Date Written: September 2011

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 scores, we analyse 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 Classification: G1, G3, M14

Suggested Citation

Guenster, Nadja and Bauer, Rob and Derwall, Jeroen and Koedijk, Kees C. G., The Economic Value of Corporate Eco‐Efficiency (September 2011). European Financial Management, Vol. 17, Issue 4, pp. 679-704, 2011. Available at SSRN: https://ssrn.com/abstract=1911058 or http://dx.doi.org/10.1111/j.1468-036X.2009.00532.x

Nadja Guenster (Contact Author)

University of Muenster - Finance Center Muenster ( email )

Universitatsstr. 14-16
Muenster, 48143
Germany

University of California, Berkeley ( email )

310 Barrows Hall
Berkeley, CA 94720
United States

Rob Bauer

Maastricht University ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands
+31 43 3883871 (Phone)

Jeroen Derwall

Maastricht University - European Centre for Corporate Engagement ( email )

FEBA
Tongersestraat 53
Maastricht, Limburg 6200MD
Netherlands

HOME PAGE: http://www.corporate-engagement.com/

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

Maastricht University - Department of Finance ( 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
Tilburg, 5000 LE
Netherlands
+31 13 4663048 (Phone)
+31 13 4662052 (Fax)

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