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The effect of environmental and social performance on the stock performance of European corporations


Ziegler, Andreas; Schröder, Michael; Rennings, Klaus (2007). The effect of environmental and social performance on the stock performance of European corporations. Environmental and Resource Economics, 37(4):661-680.

Abstract

This paper examines the effect of sustainability performance of European corporations on their stock performance, measured as the average monthly stock return from 1996 to 2001. The econometric analysis is based on common empirical asset pricing models, particularly on the multifactor model according to Fama and French (1993, Journal of Financial Economics, 33:3-56). The consideration of sustainability performance is two-fold: The average sustainability performance of the industry in which a corporation operates and the relative sustainability performance of a corporation within a given industry. The main result is that the average environmental performance of the industry has a significantly positive influence on the stock performance. In contrast, the average social performance of the industry has a significantly negative influence. The variables of the relative environmental or social performance of a corporation within a given industry have no significant effect on the stock performance. As a by-product, the econometric analysis implies that some results of Fama and French (1993, 1996, The Journal of Finance, LI (1):55-84) regarding the risk factors of the multifactor model need not hold true for different observation periods, for different stock markets, and for the use of single stocks (instead of portfolios)

Abstract

This paper examines the effect of sustainability performance of European corporations on their stock performance, measured as the average monthly stock return from 1996 to 2001. The econometric analysis is based on common empirical asset pricing models, particularly on the multifactor model according to Fama and French (1993, Journal of Financial Economics, 33:3-56). The consideration of sustainability performance is two-fold: The average sustainability performance of the industry in which a corporation operates and the relative sustainability performance of a corporation within a given industry. The main result is that the average environmental performance of the industry has a significantly positive influence on the stock performance. In contrast, the average social performance of the industry has a significantly negative influence. The variables of the relative environmental or social performance of a corporation within a given industry have no significant effect on the stock performance. As a by-product, the econometric analysis implies that some results of Fama and French (1993, 1996, The Journal of Finance, LI (1):55-84) regarding the risk factors of the multifactor model need not hold true for different observation periods, for different stock markets, and for the use of single stocks (instead of portfolios)

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:National licences > 142-005
Dewey Decimal Classification:330 Economics
Scopus Subject Areas:Social Sciences & Humanities > Economics and Econometrics
Physical Sciences > Management, Monitoring, Policy and Law
Language:English
Date:16 July 2007
Deposited On:17 Dec 2018 17:08
Last Modified:15 Apr 2021 14:53
Publisher:Springer
ISSN:0924-6460
OA Status:Green
Publisher DOI:https://doi.org/10.1007/s10640-007-9082-y

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