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Environmental Costs and Firm Value
Author(s) -
Jo Hoje,
Kim Hakkon,
Park Kwangwoo
Publication year - 2016
Publication title -
asia‐pacific journal of financial studies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.375
H-Index - 15
eISSN - 2041-6156
pISSN - 2041-9945
DOI - 10.1111/ajfs.12153
Subject(s) - reputation , value (mathematics) , argument (complex analysis) , enterprise value , maximization , business , microeconomics , industrial organization , stakeholder , economics , accounting , social science , biochemistry , chemistry , management , machine learning , sociology , computer science
Using a unique worldwide dataset, this paper examines how environmental costs affect firm value. We maintain that firms gain reputation and enhance firm value by decreasing their environmental costs. This argument is labeled as the stakeholder value maximization‐based reputation building hypothesis. Our results, however, show that there are regional variations in the relation between firm value and environmental costs. We further find that an increased firm value resulting from lower environmental costs is pronounced among firms during the Kyoto Protocol commitment period, especially in environmentally conscious countries. This evidence is consistent with the view of the differential recognition hypothesis.