IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

The Relationship between the Environmental and Financial Performance of Public Utilities

  • Greg Filbeck
  • Raymond Gorman

    ()

Registered author(s):

    A growing body of research has centered on theissue of the relationship between financial andenvironmental performance. The lack ofconsensus in this literature can be attributedto several factors. The cost of complying withenvironmental regulation can be significant anddetrimental to shareholder wealth maximization.Conversely, a firm that can effectively controlpollution might also be able to effectivelycontrol other costs of production and henceearn a higher rate of return. We utilize datafrom the Investor Responsibility ResearchCenter as well as a proprietary database toinvestigate the relationship betweenenvironmental performance and financialperformance in electric utilities. Utilities,as producers and distributors of energy,produce substantial amounts of pollution.However, since public utilities are regulated,studying the financial and environmentalperformance of utilities affords us theopportunity to see what role regulation playsin enhancing or diminishing the relationshipbetween financial and environmentalperformance.Our results differ from earlier studies in thatwe find do not find a positive relationshipbetween holding period returns and anindustry-adjusted measure of environmentalperformance nor do we find that regulatoryclimate appears to explain returns. While theredoes not appear to be a clearly definedrelationship between regulatory climate and acompliance based measure of environmentalperformance, there is evidence of a negativerelationship between financial return and amore pro-active measure of environmentalperformance. We offer several possibleinterpretations of these results and extensionsfor future research. Copyright Kluwer Academic Publishers 2004

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://hdl.handle.net/10.1023/B:EARE.0000044602.86367.ff
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Article provided by European Association of Environmental and Resource Economists in its journal Environmental and Resource Economics.

    Volume (Year): 29 (2004)
    Issue (Month): 2 (October)
    Pages: 137-157

    as
    in new window

    Handle: RePEc:kap:enreec:v:29:y:2004:i:2:p:137-157
    Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=100263

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. 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.
    2. Rao, Ramesh & Moyer, R Charles, 1994. "Regulatory Climate and Electrical Utility Capital Structure Decisions," The Financial Review, Eastern Finance Association, vol. 29(1), pages 97-124, February.
    3. John W. Maxwell & Thomas P Lyon & Steven C.. Hackett, 1995. "Self-Regulation and Social Welfare: The Political Economy of Corporate Environmentalism," University of Chicago - George G. Stigler Center for Study of Economy and State 122, Chicago - Center for Study of Economy and State.
    4. Shameek Konar & Mark A. Cohen, 2001. "Does The Market Value Environmental Performance?," The Review of Economics and Statistics, MIT Press, vol. 83(2), pages 281-289, May.
    5. Konar, Shameek & Cohen, Mark A., 1997. "Information As Regulation: The Effect of Community Right to Know Laws on Toxic Emissions," Journal of Environmental Economics and Management, Elsevier, vol. 32(1), pages 109-124, January.
    6. Karpoff, Jonathan M & Lott, John R, Jr, 1993. "The Reputational Penalty Firms Bear from Committing Criminal Fraud," Journal of Law and Economics, University of Chicago Press, vol. 36(2), pages 757-802, October.
    7. Robert D. Klassen & Curtis P. McLaughlin, 1996. "The Impact of Environmental Management on Firm Performance," Management Science, INFORMS, vol. 42(8), pages 1199-1214, August.
    8. Segerson, Kathleen & Tietenberg, Tom, 1992. "The structure of penalties in environmental enforcement: An economic analysis," Journal of Environmental Economics and Management, Elsevier, vol. 23(2), pages 179-200, September.
    9. Fama, Eugene F & French, Kenneth R, 1992. " The Cross-Section of Expected Stock Returns," Journal of Finance, American Finance Association, vol. 47(2), pages 427-65, June.
    10. Gorman, Raymond F. & Vora, Gautam, 1993. "An examination of regulatory regime and public utility underwriting costs from an agency perspective," Journal of Business Research, Elsevier, vol. 28(3), pages 211-224, November.
    11. Andrew King & Michael Lenox, 2002. "Exploring the Locus of Profitable Pollution Reduction," Management Science, INFORMS, vol. 48(2), pages 289-299, February.
    12. Karen Palmer & Wallace E. Oates & Paul R. Portney, 1995. "Tightening Environmental Standards: The Benefit-Cost or the No-Cost Paradigm?," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 119-132, Fall.
    13. Cormier, Denis & Magnan, Michel & Morard, Bernard, 1993. "The impact of corporate pollution on market valuation: some empirical evidence," Ecological Economics, Elsevier, vol. 8(2), pages 135-155, October.
    14. William F. Sharpe, 1965. "Mutual Fund Performance," The Journal of Business, University of Chicago Press, vol. 39, pages 119.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:kap:enreec:v:29:y:2004:i:2:p:137-157. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guenther Eichhorn)

    or (Christopher F. Baum)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.