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Investor Reaction to Firm Environmental Management Reputation

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Abstract

Environmental awareness has grown substantially over the last two decades. The present research study examines investor reaction to signals of environmental management (EM) reputation. Employing event study methodology, we track returns for the top 100 firms and the bottom 100 firms on the Newsweek Green Rankings from 2009. We find support for our hypotheses that the market responds positively to the firms receiving favorable recognition for EM and negatively to the firms receiving unfavorable recognition. In addition, we have added to the current literature by examining one specific component of social performance (EM) and its relationship with market valuation in an effort to better understand the construct as a whole.

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Notes

  1. We also assess performance using a value-weighted market index, and the results were qualitatively unchanged. The value-weighted index weights each firm in the CRSP universe proportionate to the aggregate index market value. The reported equal weighted index model assigns an equal weight to all firms in the index. These results are available upon request.

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Authors and Affiliations

  1. Department of Management, East Carolina University, Greenville, NC, USA

    Joshua R Aaron

  2. Department of Management, East Carolina University, Greenville, NC, USA

    Amy McMillan

  3. Department of Finance & Economics, Mississippi State University, Mississippi State, MS, USA

    Brandon N Cline

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  1. Joshua R Aaron
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  2. Amy McMillan
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  3. Brandon N Cline
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Aaron, J., McMillan, A. & Cline, B. Investor Reaction to Firm Environmental Management Reputation. Corp Reputation Rev 15, 304–318 (2012). https://doi.org/10.1057/crr.2012.15

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