The Economic Value of Corporate Eco-Efficiency
34 Pages Posted: 28 Feb 2005
Date Written: 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 Classification: G12, G14, G23, M14
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
International Evidence on Ethical Mutual Fund Performance and Investment Style
By Rogér Otten, Rob Bauer, ...
-
International Evidence on Ethical Mutual Fund Performance and Investment Style
By Rob Bauer, Kees C. G. Koedijk, ...
-
Investing in Socially Responsible Mutual Funds
By Christopher Geczy, Robert F. Stambaugh, ...
-
The Eco-Efficiency Premium Puzzle
By Jeroen Derwall, Rob Bauer, ...
-
Does the Stock Market Fully Value Intangibles? Employee Satisfaction and Equity Prices
By Alex Edmans
-
Corporate Social Performance and Stock Returns: UK Evidence from Disaggregate Measures
By Stephen J. Brammer, Chris Brooks, ...