Do Corporate Global Environmental Standards Create or Destroy Market Value?

Abstract

Arguments can be made on both sides of the question of whether a stringent global corporate environmental standard represents a competitive asset or liability for multinational enterprises (MNEs) investing in emerging and developing markets. Analyzing the global environmental standards of a sample of U.S.-based MNEs in relation to their stock market performance, we find that firms adopting a single stringent global environmental standard have much higher market values, as measured by Tobin's q, than firms defaulting to less stringent, or poorly enforced host country standards. Thus, developing countries that use lax environmental regulations to attract foreign direct investment may end up attracting poorer quality, and perhaps less competitive, firms. Our results also suggest that externalities are incorporated to a significant extent in firm valuation. We discuss plausible reasons for this observation.direct investment in developing countries, firm value, firm-level environmental policy

The whole relationship between environmental variables and firm performance: Competitive advantage and firm resources as mediator variables

“…Secondly, Christmann (2000), Dowell et al (2000) and Hart (1995) argue that researchers should investigate green issues through the lens of the resource-based view. Proactive corporate environmental strategies that go beyond regulatory compliance have a positive effect on firm performance when mediated by valuable organizational capabilities (Galdeano-Gó mez et al, 2008;Russo and Fouts, 1997;Sharma and Vredenburg, 1998;Wagner, 2005).…”

Drivers of environmental management in the Brazilian context

“…As firms rely on partners to create value, the relative importance of environmental management for one firm can spill over to business partners in the value chain (Seuring & Müller, 2008). Additionally, the value attributed to proactive environmental management may influence firms' market values (Dowell et al, 2000).…”

“…This implies that firms can superficially address environmental demands in search for legitimacy and not effectively change their practices (Aravind & Christmann, 2011). While there is a substantial body of literature concerning competitiveness of environmental policies, implementation of environmental practices is frequently taken for granted (Clarkson et al, 2011;Dowell, Hart, & Yeung, 2000;Jabbour, Silva, Paiva, & Almada Santos, 2012).…”

Sustainability Reporting Out of a Prisoner's Dilemma

“…The literature on the effects of corporate sustainability on firm value has become extensive in recent years (e. g., Dowell et al, 2000;Godfrey, 2005;Godfrey et al, 2009;Sharfman and Fernando, 2008). However, the lines of argument that can be found are similar: If it is assumed that management acts rationally and mainly on the behalf of shareholders, introducing corporate sustainability is either supposed to enhance expected cash flows, reduce investment risk, or both.…”