H1 - Environmental performance…affects the financial performance and market valuation of a firm.
H2 - The importance of strong environmental management varies across industries.
H3 - Environmental management is becoming an increasingly important dimension of firm management and operations strategy. As such, strong environmental performance is increasingly valued by financial markets.
METHODOLOGY: The authors chose to use event study methodology to determine the effect of
environmentally-related news on stock prices. A positive event is defined as the announcement by an independent third party of winning an environmental award. A negative event is defined as a crisis such as an oil, chemical or gas leak or an explosion. Total market return was estimated using an equally weighted index of all stocks in the NYSE and AMEX. Baseline stock prices were estimated from stock performance over a period of 200 days before each particular event being studied. The event period was defined as three days following the announcement, a period expected to show the financial market’s net present valuation of the event.