An analysis of the stock market impact of environmental performance information

N.H.J. Lorraine, D.J. Collison and D.M. Power

Accounting Forum, 2004, vol. 28, issue 1, 7-26

Abstract: This paper examines whether publicity (either good or bad) about environmental performance affects companies’ share prices. To date, a lot of the research in this area has been conducted in a US setting and has arrived at inconclusive results. This investigation examines the topic in a UK context. Specifically, it looks at publicity about fines for environmental pollution as well as commendations about good environmental achievements to see whether such information influences share prices. The results indicate that there is a stock market response to such news especially for details on fines—typically up to 1 week after news is published. A cross-sectional analysis indicates that the share price response is mainly a function of the relative fine imposed on the firm; other explanatory variables such as environmental performance news or sector membership were unsuccessful in explaining variations in the market responses.

Date: 2004
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DOI: 10.1016/j.accfor.2004.04.002

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