Does the market reward for going green?. Issue 6 (8th June 2015)

• Record Type: Journal Article
• Authors: Puopolo, Giovanni Walter; Teti, Emanuele; Milani, Veronica
• Is Part Of: Journal of management development. Volume 34:Issue 6(2015)
• Page Start: 729
• Page End: 742
• Publication Date: 2015-06-08
• Subjects: Social responsibility -- Management strategy -- Financial return -- Green investment; Executives -- Training of -- Periodicals; Middle managers -- Training of -- Periodicals; Management -- Study and teaching -- Periodicals; 658.407124
• DOI: 10.1108/JMD-03-2014-0027
• Languages: English
• ISSNs: 0262-1711

Abstract

Abstract : Purpose: – The purpose of this paper is to investigate the effects of the application of green standards on the companies' financial returns. It aims at answering the following question: does the market reward or penalize the players that carry out responsible management policies toward environment? Design/methodology/approach: – Using US data from 2009 to mid-2014 and employing two financial models, that is Capital Asset Pricing Model and Fama-French three-factor model, the authors first estimate the extra remuneration provided to investors. Then, the authors link this extra return to a green-based factor. The green-factor data are taken from Newsweek Green Rankings, which annually publishes an environmental ranking of the 500 biggest publicly traded companies in the USA. Findings: – The analysis demonstrates that there exists no linear relationship between the adoption of green standards and financial returns, i.e. the "green-behavior" does not affect the remuneration required by investors. These results could be justified by the fact that the implementation of environmentally friendly standards is quite a new one. Research limitations/implications: – The results could be subject to major changes in next few years, due to the increasing attention over environmental issues. Originality/value: – The paper investigates the financial profitability and the creation of economic value of a topical managerial issue, in light of the increasing importance of social responsible behavior for the companies. To the authors knowledge, this is the first paper that examines this topic.