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Green and Competitive? Evidence from the Stock Market

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  • Arora, Seema

    (Stanford U and Vanderbilt U)

Abstract

While public benefits of environmentally friendly practices are well understood, there is anecdotal evidence that suggests that firms that follow such practices also receive private benefits. The paper investigates the effect of pollution prevention activity in creating private value for the firm. Our sample consists of 635 publicly traded companies for which we have pollution related and financial data. Using event study methodology, we examine the announcement effects accompanying the Toxics Release Inventory report or the firms in our sample. Our analysis provides some evidence that firms that fail to undertake environmental improvements see a decline in their market value.

Suggested Citation

  • Arora, Seema, 2000. "Green and Competitive? Evidence from the Stock Market," Research Papers 1650, Stanford University, Graduate School of Business.
    • Handle: RePEc:ecl:stabus:1650
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    File URL: http://gsbapps.stanford.edu/researchpapers/library/RP1650.pdf
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    References listed on IDEAS

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    1. Arora Seema & Cason Timothy N., 1995. "An Experiment in Voluntary Environmental Regulation: Participation in EPA's 33/50 Program," Journal of Environmental Economics and Management, Elsevier, vol. 28(3), pages 271-286, May.
    2. Stephen J. Decanio & William E. Watkins, 1998. "Investment In Energy Efficiency: Do The Characteristics Of Firms Matter?," The Review of Economics and Statistics, MIT Press, vol. 80(1), pages 95-107, February.
    3. Patell, Jm, 1976. "Corporate Forecasts Of Earnings Per Share And Stock-Price Behavior - Empirical Tests," Journal of Accounting Research, Wiley Blackwell, vol. 14(2), pages 246-276.
    4. O'Hara, Maureen & Shaw, Wayne, 1990. "Deposit Insurance and Wealth Effects: The Value of Being "Too Big to Fail."," Journal of Finance, American Finance Association, vol. 45(5), pages 1587-1600, December.
    5. Hamilton James T., 1995. "Pollution as News: Media and Stock Market Reactions to the Toxics Release Inventory Data," Journal of Environmental Economics and Management, Elsevier, vol. 28(1), pages 98-113, January.
    6. Christie, William G., 1994. "Are Dividend Omissions Truly the Cruelest Cut of All?," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 29(3), pages 459-480, September.
    7. Nancy L. Rose, 1985. "The Incidence of Regulatory Rents in the Motor Carrier Industry," RAND Journal of Economics, The RAND Corporation, vol. 16(3), pages 299-318, Autumn.
    8. Brown, Stephen J. & Warner, Jerold B., 1980. "Measuring security price performance," Journal of Financial Economics, Elsevier, vol. 8(3), pages 205-258, September.
    9. A. Craig MacKinlay, 1997. "Event Studies in Economics and Finance," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 13-39, March.
    10. Seema Arora & Timothy N. Cason, 1996. "Why Do Firms Volunteer to Exceed Environmental Regulations? Understanding Participation in EPA's 33/50 Program," Land Economics, University of Wisconsin Press, vol. 72(4), pages 413-432.
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    Cited by:

    1. Magali Delmas & Arturo Keller, 2005. "Free riding in voluntary environmental programs: The case of the U.S. EPA WasteWise program," Policy Sciences, Springer;Society of Policy Sciences, vol. 38(2), pages 91-106, September.
    2. Arora, Seema, 2000. "Pollution Prevention as Innovation? Measuring the Long Run Stock Performance," Research Papers 1651, Stanford University, Graduate School of Business.

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