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Does It Really Pay to Be Green? An Empirical Study of Firm Environmental and Financial Performance: An Empirical Study of Firm Environmental and Financial Performance
Author(s) -
King Andrew A.,
Lenox Michael J.
Publication year - 2001
Publication title -
journal of industrial ecology
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.377
H-Index - 102
eISSN - 1530-9290
pISSN - 1088-1980
DOI - 10.1162/108819801753358526
Subject(s) - valuation (finance) , business , empirical research , empirical evidence , position (finance) , finance , work (physics) , porter hypothesis , economics , environmental policy , natural resource economics , mechanical engineering , philosophy , epistemology , engineering
Summary Previous empirical work suggests that firms with high environmental performance tend to be profitable, but questions persist about the nature of the relationship. Does stronger environmental performance really lead to better financial performance, or is the observed relationship the outcome of some other underlying firm attribute? Does it pay to have cleanrunning facilities or to have facilities in relatively clean industries? To explore these questions, we analyze 652 U.S. manufacturing firms over the time period 1987–1996. Although we find evidence of an association between lower pollution and higher financial valuation, we find that a firm's fixed characteristics and strategic position might cause this association. Our findings suggest that “When does it pay to be green?” may be a more important question than “Does it pay to be green?”