Dowell, Hart, and Yeung (2000)

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."


LK comment:  Strong paper.  Won 2001 Moskowitz Prize.

Link (published paper):