The economic value of corporate eco-efficiency

N.K. Günster, R.M.M.J. Bauer, J.M.M. Derwall, C.G. Koedijk

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

This study adds new insights to the long-running corporate environmental-financial performance debate by focusing on the concept of eco-efficiency. Using a new database of eco-efficiency scores, we analyse the relation between eco-efficiency and financial performance from 1997 to 2004. We report that eco-efficiency relates positively to operating performance and market value. Moreover, our results suggest that the market's valuation of environmental performance has been time variant, which may indicate that the market incorporates environmental information with a drift. Although environmental leaders initially did not sell at a premium relative to laggards, the valuation differential increased significantly over time. Our results have implications for company managers, who evidently do not have to overcome a tradeoff between eco-efficiency and financial performance, and for investors, who can exploit environmental information for investment decisions.

Original languageEnglish
Pages (from-to)679-704
Number of pages26
JournalEuropean Financial Management
Volume17
Issue number4
DOIs
Publication statusPublished - Sep 2011

Keywords

  • Corporate social responsibility
  • eco-efficiency
  • shareholder value
  • firm value
  • firm operating performance
  • management policies
  • capital markets
  • ENVIRONMENTAL PERFORMANCE
  • SOCIAL-RESPONSIBILITY
  • FINANCIAL PERFORMANCE
  • UNITED-STATES
  • MARKET VALUE
  • MANAGEMENT
  • POLLUTION
  • FIRM
  • PROFITABILITY

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