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An analysis of the stock market impact of environmental performance information

Author

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  • N.H.J. Lorraine
  • D.J. Collison
  • D.M. Power

Abstract

This paper examines whether publicity (either good or bad) about environmental performance affects companies’ share prices. To date, a lot of the research in this area has been conducted in a US setting and has arrived at inconclusive results. This investigation examines the topic in a UK context. Specifically, it looks at publicity about fines for environmental pollution as well as commendations about good environmental achievements to see whether such information influences share prices. The results indicate that there is a stock market response to such news especially for details on fines—typically up to 1 week after news is published. A cross-sectional analysis indicates that the share price response is mainly a function of the relative fine imposed on the firm; other explanatory variables such as environmental performance news or sector membership were unsuccessful in explaining variations in the market responses.

Suggested Citation

  • N.H.J. Lorraine & D.J. Collison & D.M. Power, 2004. "An analysis of the stock market impact of environmental performance information," Accounting Forum, Taylor & Francis Journals, vol. 28(1), pages 7-26, March.
    • Handle: RePEc:taf:accfor:v:28:y:2004:i:1:p:7-26
    DOI: 10.1016/j.accfor.2004.04.002
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