Does the stock market value the inclusion in a sustainability stock index? An event study analysis for German firms

Journal of Environmental Economics and Management

Volumn 66, Issue 3, 2013, Pages 497-509

  Oberndorfer, Ulrich ^a   Schmidt, Peter ^b   Wagner, Marcus ^c,d   Ziegler, Andreas ^b,e,f  

^a OECD   (France)

^b UNIVERSITY OF ZURICH   (Switzerland)

^c UNIVERSITY OF WÜRZBURG   (Germany)

^d UNIVERSITÉ DE STRASBOURG   (France)

^e UNIVERSITY OF KASSEL   (Germany)

^f CENTRE FOR EUROPEAN ECONOMIC RESEARCH ZEW   (Germany)

Author keywords

Corporate financial performance; Event study; GARCH model; Sustainability stock indexes; Three factor model

Indexed keywords

CORPORATE FINANCIAL PERFORMANCE; EVENT STUDIES; GARCH MODELS; STOCK INDICES; THREE-FACTOR MODEL;

COMMERCE; INDUSTRY; SUSTAINABLE DEVELOPMENT;

FINANCE;

EMPIRICAL ANALYSIS; ESTIMATION METHOD; PERFORMANCE ASSESSMENT; STOCK MARKET; SUSTAINABLE DEVELOPMENT;

GERMANY;

EID: 84888199926     PISSN: 00950696     EISSN: 10960449     Source Type: Journal    
DOI: 10.1016/j.jeem.2013.04.005     Document Type: Article

References (73)

1. Andersen T.G., Bollerslev T. Answering the skeptics: yes, standard volatility models do provide accurate forecasts. International Economic Review 1998, 39:885-905.
2. Babalan E., Constantinou C.T. Volatility clustering and event-induced volatility: evidence from UK mergers and acquisitions. European Journal of Finance 2006, 12:449-453.
3. Barnett M.L., Salomon R.M. Beyond dichotomy: the curvilinear relationship between social responsibility and financial performance. Strategic Management Journal 2006, 27:1101-1122.
4. Barney J. Firm resources and sustained competitive advantage. Journal of Management 1991, 17:99-120.
5. Bauer R., Derwall J., Otten R. The ethical mutual fund performance debate: new evidence from Canada. Journal of Business Ethics 2007, 70:111-124.
6. Bauer R., Koedijk K., Otten R. International evidence on ethical mutual fund performance and investment style. Journal of Banking and Finance 2005, 29:1751-1767.
7. L. Becchetti, R. Ciciretti, I. Hasan, Corporate Social Responsibility and Shareholder's Value: An Event Study Analysis, Federal Reserve Bank of Atlanta, Working Paper Series, Working Paper 2007-6, 2007.
8. Becchetti L., Di Giacomo S., Pinnacchio D. Corporate social responsibility and corporate performance: evidence from a panel of US listed companies. Applied Economics 2008, 40:541-567.
9. Boehmer E., Musumeci J., Poulsen A.B. Event-study methodology under conditions of event-induced variance. Journal of Financial Economics 1991, 30:253-272.
10. Bollerslev T. Generalized autoregressive conditional heteroskedasticity. Journal of Econometrics 1986, 31:307-327.
11. Campbell J.Y., Lo A.W., MacKinlay A.C. The Econometrics of Financial Markets 1997, Princeton University Press, Princeton.
12. Cañón-de-Francia J., Garcés-Ayerbe C. ISO 14001 environmental certification: a sign valued by the market?. Environmental and Resource Economics 2009, 44:245-262.
13. Capelle-Blancard G., Laguna M.-A. How does the stock market respond to chemical disasters. Journal of Environmental Economics and Management 2010, 59:192-205.
14. Carhart M.M. On persistence in mutual fund performance. Journal of Finance 1997, 52:57-82.
15. Cheung A.W.K. Do stock investors value corporate sustainability? Evidence from an event study. Journal of Business Ethics 2011, 99:145-165.
16. Corrado C.J. A nonparametric test for abnormal security-price performance in event studies. Journal of Financial Economics 1989, 23:385-395.
17. Curran M.M., Moran D. Impact of the FTSE4Good index on firm price: an event study. Journal of Environmental Management 2007, 82:529-537.
18. Dasgupta S., Laplante B., Nlandu M. Pollution and capital markets in developing countries. Journal of Environmental Economics and Management 2001, 42:310-335.
19. Derwall J., Guenster N., Bauer R., Koedijk K. The eco-efficiency premium puzzle. Financial Analysts Journal 2005, 61:51-63.
20. DiMaggio P.J., Powell W.W. The iron cage revisited: institutional isomorphism and collective rationality in organizational fields. American Sociological Review 1983, 48:147-160.
21. Doh J.P., Howton S.D., Howton S.W., Siegel D.S. Does the market respond to endorsement of social responsibility? The role of institutions, information, and legitimacy. Journal of Management 2010, 36:1461-1485.
22. Engle R.F. GARCH 101: the use of ARCH/GARCH models in applied econometrics. Journal of Economic Perspectives 2001, 15:157-168.
23. Fama E.F. Risk, return, and equilibrium: some clarifying comments. Journal of Finance 1968, 23:29-40.
24. Fama E.F., French K.R. Common risk factors in the returns on stocks and bonds. Journal of Financial Economics 1993, 33:3-56.
25. Fama E.F., French K.R. Multifactor explanations of asset pricing anomalies. Journal of Finance 1996, 51:55-84.
26. Fama E.F., Fisher L., Jensen M., Roll R. The adjustment of stock prices to new information. International Economic Review 1969, 10:1-21.
27. Filbeck G., Gorman R.F. The relationship between the environmental and financial performance of public utilities. Environmental and Resource Economics 2004, 29:137-157.
28. Fisher-Vanden K., Thorburn K.S. Voluntary corporate environmental initiatives and shareholder wealth. Journal of Environmental Economics and Management 2011, 62:430-445.
29. Fowler S.J., Hope C. A critical review of sustainable business indices and their impact. Journal of Business Ethics 2007, 76:243-252.
30. M. Friedman, The Social Responsibility of Business is to Increase its Profits, The New York Times Magazine, 13 September 1970.
31. Guenster N., Bauer R., Derwall J., Koedijk K. The economic value of corporate eco-efficiency. European Financial Management 2011, 17:679-704.
32. Gupta S., Goldar B. Do stock markets penalize environment-unfriendly behaviour? Evidence from India. Ecological Economics 2005, 52:81-95.
33. Hamilton J.T. Pollution as news: media and stock market reactions to the toxics release inventory data. Journal of Environmental Economics and Management 1995, 28:98-113.
34. Heal G. Corporate social responsibility: an economic and financial framework. Geneva Papers 2005, 30:387-409.
35. I. Hussain, S. Toms, S. Diacon, Financial Distress, Single and Multifactor Tests and Comparisons of Asset Pricing Anomalies: New Evidence, Nottingham University Business School, 2002.
36. Kempf A., Osthoff P. The effect of socially responsible investing on portfolio performance. European Financial Management 2007, 13:908-922.
37. Khanna M., Quimo W.R., Bojilova D. Toxics release information: a policy tool for environmental protection. Journal of Environmental Economics and Management 1998, 36:243-266.
38. King A., Lenox M Does it really pay to be green?. Journal of Industrial Ecology 2001, 5:105-116.
39. King A., Lenox M. Exploring the locus of profitable pollution reduction. Management Science 2002, 48:289-299.
40. Klassen R.D., Whybark D.C. The impact of environmental technologies on manufacturing performance. Academy of Management Journal 1999, 42:599-615.
41. Koellner T., Suh S., Weber O., Moser C., Scholz R.W. Environmental impacts of conventional and sustainable investment funds compared using input-output life-cycle assessment. Journal of Industrial Ecology 2007, 11:41-60.
42. Kolari J.W., Pynnönen S. Event study testing with cross-sectional correlation of abnormal returns. The Review of Financial Studies 2010, 23:3996-4025.
43. Konar S., Cohen M.A. Information as regulation: the effect of community right to know laws on toxic emissions. Journal of Environmental Economics and Management 1997, 32:109-124.
44. Konar S., Cohen M.A. Does the market value environmental performance. The Review of Economics and Statistics 2001, 83:281-289.
45. Kothari S.P., Warner J.B. Econometrics of event studies. Handbook of Corporate Finance: Empirical Corporate Finance 2006, 3-36. Elsevier, North-Holland. B.E. Eckbo (Ed.).
46. Lintner J. The valuation of risk assets and the selection of risky investments in stock portfolios and capital budgets. The Review of Economics and Statistics 1965, 47:13-37.
47. J.D. Lyon, B.M. Barber, C.-L. Tsai, Improved Methods for Tests of Long-Run Abnormal Stock Returns, Journal of Finance 54 (1999) 165-201.
48. McWilliams A., Siegel D. Event studies in management research: theoretical and empirical issues. Academy of Management Journal 1997, 40:626-657.
49. McWilliams A., Siegel D. Corporate social responsibility and financial performance: correlation or misspecification?. Strategic Management Journal 2000, 21:603-609.
50. McWilliams A., Siegel D., Wright P.M. Corporate social responsibility: strategic implications. Journal of Management Studies 2006, 43:1-18.
51. U. Oberndorfer, D. Ulbricht, Lost in Transmission? Stock Market Impacts of the 2006 European Gas Crisis, ZEW Discussion Paper no. 07-030, Mannheim, 2007.
52. Porter M. America's green strategy. Scientific American 1991, 264:96.
53. Posnikoff J.F. Disinvestment from South Africa: they did well by doing good. Contemporary Economic Policy 1997, 15:76-86.
54. Renneboog L., Horst J.T., Zhang C. Socially responsible investments: institutional aspects, performance, and investor behavior. Journal of Banking and Finance 2008, 32:1723-1742.
55. Rodriguez M.J., Ruiz E. Revisiting several popular GARCH models with leverage effect: differences and similarities. Journal of Financial Econometrics 2012, 10:637-668.
56. Russo M.V., Fouts P.A. A resource-based perspective on corporate environmental performance and profitability. Academy of Management Journal 1997, 40:534-559.
57. D.H. Sandler, R. Sandler, Multiple Event Studies in Public Finance: A Simulation Study with Applications, UC Davis, 2012.
58. Sauer D.A. The impact of social-responsibility screens on investment performance: evidence from the domini 400 social index and domini equity mutual fund. Review of Financial Economics 1997, 6:137-149.
59. Schröder M. Is there a difference? The performance characteristics of SRI equity indices. Journal of Business Finance and Accounting 2007, 34:331-348.
60. A. Schulz, R. Stehle, Buchwert-Marktwert-Verhältnis, Size und Beta als Erklärungsvariable für die Renditen deutscher Aktien, Humboldt-Universität, Berlin, 2002.
61. Shadbegian R.J., Gray W.B. Pollution abatement expenditures and plant-level productivity: a production function approach. Ecological Economics 2005, 54:196-208.
62. Sharpe W.F. A simplified model for portfolio analysis. Management Science 1963, 9:277-293.
63. Sharpe W.F. Capital asset prices: a theory of market equilibrium under conditions of risk. Journal of Finance 1964, 19:425-442.
64. Shleifer A., Vishny R.W. A survey of corporate governance. Journal of Finance 1997, 52:737-783.
65. Stehle R., Hartmond A. Durchschnittsrenditen deutscher Aktien 1954-1988. Kredit und Kapital 1991, 24:371-411.
66. Telle K. "It pays to be green"-a premature conclusion?. Environmental and Resource Economics 2006, 35:195-220.
67. Tirole J. The Theory of Corporate Finance 2006, Princeton University Press, Princeton.
68. Waddock S., Graves S.B. The corporate social performance-financial performance link. Strategic Management Journal 1997, 18:303-319.
69. Wagner M., Schaltegger S., Wehrmeyer W. The relationship between the environmental and economic performance of firms: what does theory propose and what does empirical evidence tell us?. Greener Management International 2001, 34:95-108.
70. Ziegler A. Is it beneficial to be Included in a sustainability stock index? A panel data study for European firms. Environmental and Resource Economics 2012, 52:301-325.
71. Ziegler A., Schröder M. What determines the inclusion in a sustainability stock index? A panel data analysis for European firms. Ecological Economics 2010, 69:848-856.
72. Ziegler A., Schröder M., Rennings K. The effect of environmental and social performance on the stock performance of European corporations. Environmental and Resource Economics 2007, 37:661-680.
73. Ziegler A., Schröder M., Schulz A., Stehle R. Multifaktormodelle zur Erklärung deutscher Aktienrenditen: Eine empirische Analyse. Schmalenbachs Zeitschrift für betriebswirtschaftliche Forschung 2007, 59:355-389.