Voluntary Corporate Environmental Initiatives and Shareholder Wealth

Karin Thorburn () and Karen Fisher-Vanden

No 6698, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Researchers debate whether environmental investments reduce firm value or can actually improve financial performance. We provide some first evidence on shareholder wealth effects of voluntary corporate environmental initiatives. Companies announcing membership in Climate Leaders and Ceres - two voluntary environmental programs related to climate change - experience significantly negative abnormal stock returns. The price decline is smaller in carbon-intensive industries, where regulatory actions are more likely, and for high book-to-market firms, suggesting that "green" expenditures crowd out growth-related investments. We also document insignificant announcement returns for portfolios of industry rivals. Overall, the environmental investments appear to conflict with shareholder value-maximization. This has far reaching implications since the U.S. government relies on voluntary initiatives to reduce the emissions of greenhouse gases.

Keywords: Capital expenditures; Climate change; Corporate social responsibility; Environmentally responsible investing; Shareholder wealth (search for similar items in EconPapers)
JEL-codes: G31 G38 Q5 (search for similar items in EconPapers)
Date: 2008-02
New Economics Papers: this item is included in nep-env and nep-soc
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Journal Article: Voluntary corporate environmental initiatives and shareholder wealth (2011)
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