Advanced Search
MyIDEAS: Login to save this article or follow this journal

The Impact of Environmental Management on Firm Performance

Contents:

Author Info

  • Robert D. Klassen

    (Western Business School, University of Western Ontario, London, Ontario, Canada N6A 3K7)

  • Curtis P. McLaughlin

    (Kenan-Flagler Business School, University of North Carolina at Chapel Hill, Chapel Hill, North Carolina 27599-3490)

Registered author(s):

    Abstract

    Environmental management has the potential to play a pivotal role in the financial performance of the firm. Many individuals suggest that profitability is hurt by the higher production costs of environmental management initiatives, while others cite anecdotal evidence of increased profitability. A theoretical model is proposed that links strong environmental management to improved perceived future financial performance, as measured by stock market performance. The linkage to firm performance is tested empirically using financial event methodology and archival data of firm-level environmental and financial performance. Significant positive returns were measured for strong environmental management as indicated by environmental performance awards, and significant negative returns were measured for weak environmental management as indicated by environmental crises. The implicit financial market valuation of these events also was estimated. Cross-sectional analysis of the environmental award events revealed differences for first-time awards and between industries. First-time award announcements were associated with greater increases in market valuation, although smaller increases were observed for firms in environmentally dirty industries, possibly indicative of market skepticism. This linkage between environmental management and financial performance can be used by both researchers and practitioners as one measure of the benefits experienced by industry leaders, and as one criterion against which to measure investment alternatives.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://dx.doi.org/10.1287/mnsc.42.8.1199
    Download Restriction: no

    Bibliographic Info

    Article provided by INFORMS in its journal Management Science.

    Volume (Year): 42 (1996)
    Issue (Month): 8 (August)
    Pages: 1199-1214

    as in new window
    Handle: RePEc:inm:ormnsc:v:42:y:1996:i:8:p:1199-1214

    Contact details of provider:
    Postal: 7240 Parkway Drive, Suite 300, Hanover, MD 21076 USA
    Phone: +1-443-757-3500
    Fax: 443-757-3515
    Email:
    Web page: http://www.informs.org/
    More information through EDIRC

    Related research

    Keywords: financial performance; environmental awards; operations management; environmental performance;

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:42:y:1996:i:8:p:1199-1214. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.