Environmental Costs and Firm Value1. (7th December 2016)

• Record Type: Journal Article
• Authors: Jo, Hoje; Kim, Hakkon; Park, Kwangwoo
• Is Part Of: Asia-Pacific journal of financial studies. Volume 45:Number 6(2016:Dec.)
• Page Start: 813
• Page End: 838
• Publication Date: 2016-12-07
• Subjects: Corporate environmental responsibility -- Environmental costs -- Firm value -- Reputation building hypothesis -- Differential recognition hypothesis -- Kyoto Protocol; Pacific Area -- Economic conditions -- Periodicals; Finance -- Asia -- Periodicals; Finance -- Pacific Area -- Periodicals; Asia -- Economic conditions -- Periodicals; 332.09505
• DOI: 10.1111/ajfs.12153
• Languages: English
• ISSNs: 2041-9945

Abstract

Abstract: Using a unique worldwide dataset, this paper examines how environmental costs affect firm value. We maintain that firms gain reputation and enhance firm value by decreasing their environmental costs. This argument is labeled as the stakeholder value maximization‐based reputation building hypothesis. Our results, however, show that there are regional variations in the relation between firm value and environmental costs. We further find that an increased firm value resulting from lower environmental costs is pronounced among firms during the Kyoto Protocol commitment period, especially in environmentally conscious countries. This evidence is consistent with the view of the differential recognition hypothesis.