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“Green Companies” and Financial Performance: The Green Premium

Author

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  • Kranias, Athanasios
  • Psychoyios, Dimitrios
  • Refenes, Apostolos-Paul

Abstract

We examine the relationship between Corporate Environmental Responsibility and Corporate Financial Performance for the S&P500 firms over a period of fifteen years. We test the effect of Jensen's alpha, stock returns, return-on-asset, size, sales, and profit on Corporate Environmental Responsibility by building a CAPM model of risk-adjusted excess returns under efficient-market hypothesis and introduce the “Green Premium,” the cost in stock return stockholders have to incur for their company's “greenness”. Although, “green” practices are positively related to sales and profit, the results suggest that market value of the company is not increased and that a significant negative relationship exists between “greenness” and stock's performance.

Suggested Citation

  • Kranias, Athanasios & Psychoyios, Dimitrios & Refenes, Apostolos-Paul, 2024. "“Green Companies” and Financial Performance: The Green Premium," International Review of Economics & Finance, Elsevier, vol. 96(PA).
    • Handle: RePEc:eee:reveco:v:96:y:2024:i:pa:s1059056024005173
    DOI: 10.1016/j.iref.2024.103525
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    More about this item

    Keywords

    Financial performance; Environmental premium; Corporate environmental responsibility; Environmental finance;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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