Dowell, Glen, Stuart Hart, and Bernard Yeung. "Do Corporate Environmental Standards Create or Destroy Market Value?" Management Science, August 2000.

Examines the market valuations and environmental policies of S&P 500 manufacturing and mining companies from 1994 to 1997. The list was narrowed by including only companies with operations in countries with per capita GDP below $8,000 (1985 dollars), on the grounds that "evidence suggests that concern for and activity in environmental regulation decreases dramatically for countries with per capita income below $8,000."

Finds that company with the highest stated environmental standards (as reported by IRRC) also tended to have significantly higher price/book ratios (p<.05). Adjustments were made for industry membership, R&D intensity, advertising intensity, financial leverage, asset size, and foreign sales.

Concludes that there is "a significant and positive relationship between the market value of a company (as measured by Tobin's q [price/book ratio -LK]) and the level of environmental standard it uses... Furthermore, our results suggest that a firm's market value appreciates quickly once a firm adopts a higher environmental standard."

This study won the 2001 Moskowitz Prize competition for the best quantitative study of socially responsible investing.