Voluntary Corporate Environmental Initiatives and Shareholder Wealth
AbstractResearchers debate whether environmental investments reduce firm value or can actually improve financial performance. We provide some first evidence on shareholder wealth effects of voluntary corporate environmental initiatives. Companies announcing membership in Climate Leaders and Ceres - two voluntary environmental programs related to climate change - experience significantly negative abnormal stock returns. The price decline is smaller in carbon-intensive industries, where regulatory actions are more likely, and for high book-to-market firms, suggesting that "green" expenditures crowd out growth-related investments. We also document insignificant announcement returns for portfolios of industry rivals. Overall, the environmental investments appear to conflict with shareholder value-maximization. This has far reaching implications since the U.S. government relies on voluntary initiatives to reduce the emissions of greenhouse gases.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6698.
Date of creation: Feb 2008
Date of revision:
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Other versions of this item:
- Fisher-Vanden, Karen & Thorburn, Karin S., 2011. "Voluntary corporate environmental initiatives and shareholder wealth," Journal of Environmental Economics and Management, Elsevier, vol. 62(3), pages 430-445.
- G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
- G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
- Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-04-12 (All new papers)
- NEP-ENV-2008-04-12 (Environmental Economics)
- NEP-SOC-2008-04-12 (Social Norms & Social Capital)
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