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Does corporate environmental responsibility create value?: Evidence from supreme Court rulings

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  • Kim, Taehyun
  • Kim, Yongjun

Abstract

We investigate the impact of corporate environmental responsibility (CER) actions on firm value, using two 5-to-4 Supreme Court rulings. Employing an event study approach, we find that firms expected to increase CER activities experience positive market reactions. The market reactions are greater for firms that are under more significant CER pressure from the Court decisions. These return patterns are more pronounced among firms located in states with Democratic state governments and in regions with high levels of social trust where stakeholders are more attentive to CER. Additionally, we examine the relationship between CER and corporate financial performance, and find that firms with strong CER policies tend to have a higher level of revenue, profitability, and ownership held by institutional investors with longer investment horizons. Our evidence suggests that the market views CER as essential for meeting the growing sustainability demands in today’s financial markets.

Suggested Citation

  • Kim, Taehyun & Kim, Yongjun, 2025. "Does corporate environmental responsibility create value?: Evidence from supreme Court rulings," Journal of Behavioral and Experimental Finance, Elsevier, vol. 45(C).
    • Handle: RePEc:eee:beexfi:v:45:y:2025:i:c:s2214635024001217
    DOI: 10.1016/j.jbef.2024.101006
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    More about this item

    Keywords

    Corporate environmental responsibility (CER); Environmental; social; and governance (ESG); Supreme Court rulings; Event studies; Announcement returns;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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