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Pollution Prevention as Innovation? Measuring the Long Run Stock Performance

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  • Arora, Seema

    (Stanford U and Vanderbilt U)

Abstract

We examine whether pollution prevention actions result in innovation. Since a change in the product or process is not instantaneous, we compute the buy and hold returns for the long run to capture the gains due to innovation. We compare the stock market performances for firms that reported pollution prevention efforts with firms that do not report such efforts. Our results indicate that firms that engage in prevention efforts consistently outperform firms that do not engage in such efforts. Our paper is the first systematic effort to measure the private benefits due to pollution prevention activities.

Suggested Citation

  • Arora, Seema, 2000. "Pollution Prevention as Innovation? Measuring the Long Run Stock Performance," Research Papers 1651, Stanford University, Graduate School of Business.
    • Handle: RePEc:ecl:stabus:1651
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    File URL: http://gsbapps.stanford.edu/researchpapers/library/RP1651.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. Huang, Roger D. & Stoll, Hans R., 1996. "Dealer versus auction markets: A paired comparison of execution costs on NASDAQ and the NYSE," Journal of Financial Economics, Elsevier, vol. 41(3), pages 313-357, July.
    3. Arora, Seema, 2000. "Green and Competitive? Evidence from the Stock Market," Research Papers 1650, Stanford University, Graduate School of Business.
    4. 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.
    5. Barber, Brad M. & Lyon, John D., 1997. "Detecting long-run abnormal stock returns: The empirical power and specification of test statistics," Journal of Financial Economics, Elsevier, vol. 43(3), pages 341-372, March.
    6. 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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