ISO 14001 (Environmental Management Standard) helps corporations to build legitimacy and goodwill, and can be also viewed as an organizational response to institutional pressure to act proactively towards the environment. The purpose of this paper is to investigate how investors in the emerging country value voluntary environmental management standard ISO 14001 certification. The impact of voluntary environmental management standard ISO 14001 on market performance is still not clear. By using event study methodology, this study matched ISO-certified firms with non-certified ones based on three different matching principles that include return on assets, size, and industry. The findings indicated that investors negatively valued ISO 14001 in both the short and long run. The study recommended policy implications for managers, policy makers, and non-government organizations.
Environmental Management System, that is, ISO 14001, helps to build corporate reputation, legitimacy, and can also be considered as firms' strategic response to institutional pressure to reduce the impact of business activity on natural environment. It arises the question: does ISO 14001 pay off financially? Unfortunately, this question remains broadly unanswered. Current studies on this issue show mixed and inconclusive findings. By employing rigorous event study approach, this paper compares ISO 14001 certified firms with their noncertified counterpart based on different matching criteria that include size, return on asset, and industry. The results indicate that the ISO 14001 is negatively evaluated by the investors in both the short and long run. This paper also suggests implications for policy makers, managers, and other nonprofit organizations.
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