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Environmental Reporting, Financial Fundamentals and Company Valuation: Insights from the Industrial Sector

Author

Listed:
  • Dan Gabriel Dumitrescu

    (Bucharest University of Economic Studies, Romania)

  • Stefania Cristina Curea

    (Bucharest University of Economic Studies, Romania)

  • Cristiana Ioana Coman

    (Bucharest University of Economic Studies, Romania)

  • Anca Gabriela Ilie

    (Bucharest University of Economic Studies, Romania)

  • Renate Bratu

    (Lucian Blaga University of Sibiu, Sibiu, Romania)

  • Alma Pentescu

    (Lucian Blaga University of Sibiu, Sibiu, Romania)

Abstract

The paper investigates the effect of environmental policies on the market valuation of companies within the European Union's Industrial sector, along with traditional financial indicators. Taking into account the Corporate Sustainability Reporting Directive imposed by the European Union authorities for the most prominent companies, we used a comprehensive data set of 494 publicly listed companies over the period 2020-2023 to assess the predictive impact of environmental policy adoption (EPO), environmental policy quality scores (EPOS), and financial variables (FV) on the price-to-book (PB) ratio of listed companies. We use a Random Forest regression model to identify and rank the importance of a comprehensive set of variables, underlining the idea of investor attention and priorities. The main findings point to an increase in investor interest in the effectiveness of environmental policies rather than their simple presence, emphasising the strategic importance of integrating measurable environmental outcomes into company valuation frameworks. However, traditional financial variables consistently outperform environmental indicators in explaining market valuation.

Suggested Citation

  • Dan Gabriel Dumitrescu & Stefania Cristina Curea & Cristiana Ioana Coman & Anca Gabriela Ilie & Renate Bratu & Alma Pentescu, 2025. "Environmental Reporting, Financial Fundamentals and Company Valuation: Insights from the Industrial Sector," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 27(70), pages 731-731, August.
    • Handle: RePEc:aes:amfeco:v:27:y:2025:i:70:p:731
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    Keywords

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    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis

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