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Environmental Information Provision, Market Valuation, and Firm Incentives: An Empirical Study of the Japanese PRTR System

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  • Akira Hibiki
  • Shunsuke Managi

Abstract

The environmental performance of a listed firm could affect its level of investment in pollution prevention and its access to financial markets. Previous studies using Tobin’s q that explore market response to environmental performance do not distinguish between the impact of performance on investment and market response, which may mislead conclusions. To overcome this problem, we simultaneously estimate the functions of the intangible asset, the replacement cost, and the toxic chemical risk. We find that the Japanese financial market does not value risk associated with toxic chemical releases. Nevertheless, even without market valuation, firms increase investment to reduce pollution.

Suggested Citation

  • Akira Hibiki & Shunsuke Managi, 2010. "Environmental Information Provision, Market Valuation, and Firm Incentives: An Empirical Study of the Japanese PRTR System," Land Economics, University of Wisconsin Press, vol. 86(2), pages 382-393.
  • Handle: RePEc:uwp:landec:v:86:y:2010:i:2:p:382-393
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Fujii, Hidemichi & Managi, Shunsuke, 2015. "Trends in corporate environmental management studies and databases," MPRA Paper 66531, University Library of Munich, Germany.
    2. Tang, John P., 2015. "Pollution havens and the trade in toxic chemicals: Evidence from U.S. trade flows," Ecological Economics, Elsevier, vol. 112(C), pages 150-160.
    3. Shunsuke Managi & Tatsuyoshi Okimoto & Akimi Matsuda, 2012. "Do socially responsible investment indexes outperform conventional indexes?," Applied Financial Economics, Taylor & Francis Journals, vol. 22(18), pages 1511-1527, September.
    4. Shivananda Shetty & Surender Kumar, 2017. "Are voluntary environment programs effective in improving the environmental performance: evidence from polluting Indian Industries," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 19(4), pages 659-676, October.
    5. Tang, John P., 2015. "Pollution havens and the trade in toxic chemicals: Evidence from U.S. trade flows," Ecological Economics, Elsevier, vol. 112(C), pages 150-160.
    6. Hidemichi Fujii & Shunsuke Managi, 2016. "Trends in corporate environmental management studies and databases," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 18(2), pages 265-272, April.
    7. Takashi Hatakeda & Katsuhiko Kokubu & Takehisa Kajiwara & Kimitaka Nishitani, 2012. "Factors Influencing Corporate Environmental Protection Activities for Greenhouse Gas Emission Reductions: The Relationship Between Environmental and Financial Performance," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 53(4), pages 455-481, December.
    8. Kimitaka Nishitani & Katsuhiko Kokubu, 2012. "Why Does the Reduction of Greenhouse Gas Emissions Enhance Firm Value? The Case of Japanese Manufacturing Firms," Business Strategy and the Environment, Wiley Blackwell, vol. 21(8), pages 517-529, December.
    9. Massier, Philipp & Römer, Daniel, 2012. "On the Obligation to Provide Environmental Information in the 21st Century – Empirical Evidence from Germany," Working Papers 0524, University of Heidelberg, Department of Economics.
    10. Kimitaka Nishitani & Shinji Kaneko & Satoru Komatsu & Hidemichi Fujii, 2011. "Firm's reduction of greenhouse gas emissions and economic performance: analyzing effects through demand and productivity," IDEC DP2 Series 1-1, Hiroshima University, Graduate School for International Development and Cooperation (IDEC).
    11. Hidemichi Fujii & Kazuyuki Iwata & Shinji Kaneko & Shunsuke Managi, 2013. "Corporate Environmental and Economic Performance of Japanese Manufacturing Firms: Empirical Study for Sustainable Development," Business Strategy and the Environment, Wiley Blackwell, vol. 22(3), pages 187-201, March.
    12. Kimitaka Nishitani & Shinji Kaneko & Satoru Komatsu & Hidemichi Fujii, 2014. "How does a firm’s management of greenhouse gas emissions influence its economic performance? Analyzing effects through demand and productivity in Japanese manufacturing firms," Journal of Productivity Analysis, Springer, vol. 42(3), pages 355-366, December.
    13. Markus Hang & Jerome Geyer‐Klingeberg & Andreas W. Rathgeber, 2019. "It is merely a matter of time: A meta‐analysis of the causality between environmental performance and financial performance," Business Strategy and the Environment, Wiley Blackwell, vol. 28(2), pages 257-273, February.
    14. Arimura, Toshi H. & Kaneko, Shinji & Managi, Shunsuke & Shinkuma, Takayoshi & Yamamoto, Masashi & Yoshida, Yuichiro, 2019. "Political economy of voluntary approaches: A lesson from environmental policies in Japan," Economic Analysis and Policy, Elsevier, vol. 64(C), pages 41-53.
    15. Claudia Poser & Edeltraud Guenther & Marc Orlitzky, 2012. "Shades of green: using computer-aided qualitative data analysis to explore different aspects of corporate environmental performance," Metrika: International Journal for Theoretical and Applied Statistics, Springer, vol. 22(4), pages 413-450, January.
    16. Isabel Gallego‐Álvarez & Isabel M. García‐Sánchez & Cléber da Silva Vieira, 2014. "Climate Change and Financial Performance in Times of Crisis," Business Strategy and the Environment, Wiley Blackwell, vol. 23(6), pages 361-374, September.
    17. Surender Kumar & Shivananda Shetty, 2018. "Does environmental performance improve market valuation of the firm: evidence from Indian market," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 20(2), pages 241-260, April.
    18. Toshi H.Arimura & Shinji Kaneko & Shunsuke Managi & Takayoshi Shinkuma & Masashi Yamamoto & Yuichiro Yoshida, 2016. "Political Economy of Voluntary Approaches: A Lesson from Environmental Policies," Working Papers e107, Tokyo Center for Economic Research.

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    More about this item

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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