Environmental performance, environmental management and company valuation

Abstract

Purpose This paper aims to investigate the relationship between environmental performance and management and company valuation. With a specific focus on company valuation, this study shows how a firm’s environmental activities, including its environmental management practices, are perceived and valued by its stockholders. Design/methodology/approach Newsweek’s green ranking data between 2014 and 2016 were used to support this analysis. Environmental performances and environmental management practices of 345 Fortune 500 companies from various industries were included in the data set. Findings The analysis finds higher valuations for US companies that are more efficient in managing greenhouse gas emissions. In addition, it empirically shows that investors place a higher value on companies with the following environment-related management policies: initiatives that reward top management for achieving environmental goals and third-party auditing of environmental performance. Originality/value By incorporating corporate environmental management practices as an additional environmental performance criterion, this research fills a gap in the literature on the potential relationship between corporate environmental performance and company valuation.