“Green Companies” and Financial Performance: The Green Premium

Athanasios Kranias, Dimitrios Psychoyios and Apostolos-Paul Refenes

International Review of Economics & Finance, 2024, vol. 96, issue PA

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.

Keywords: Financial performance; Environmental premium; Corporate environmental responsibility; Environmental finance (search for similar items in EconPapers)
JEL-codes: G30 M14 Q50 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:96:y:2024:i:pa:s1059056024005173

DOI: 10.1016/j.iref.2024.103525

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