Voluntary Corporate Environmental Initiatives and Shareholder Wealth

Thumbnail Image
Penn collection
Finance Papers
Degree type
corporate social responsibility
environmentally responsible investing
climate change
greenhouse gas emissions
capital expenditures
shareholder wealth
Corporate Finance
Environmental Policy
Environmental Studies
Finance and Financial Management
Grant number
Copyright date
Related resources
Fisher-Vanden, Karen
Thorburn, Karin S

Researchers debate whether environmental investments reduce firm value or actually improve financial performance. We provide some compelling evidence on shareholder wealth effects of membership in voluntary environmental programs (VEPs). Companies announcing membership in EPA's Climate Leaders, a program targeting reductions in greenhouse gas emissions, experience significantly negative abnormal stock returns. The price decline is larger in firms with poor corporate governance structures, and for high market-to-book (i.e., high growth) firms. However, firms joining Ceres, a program involving more general environmental commitments, have insignificant announcement returns, as do portfolios of industry rivals. Overall, corporate commitments to reduce greenhouse gas emissions appear to conflict with firm value maximization. This has important implications for policies that rely on voluntary initiatives to address climate change. Further, we find that firms facing climate-related shareholder resolutions or firms with weak corporate governance standards – giving managers the discretion to make such voluntary environmentally responsible investment decisions – are more likely to join Climate Leaders; decisions that may result in lower firm value.

Date Range for Data Collection (Start Date)
Date Range for Data Collection (End Date)
Digital Object Identifier
Series name and number
Publication date
Journal title
Journal of Environmental Economics and Management
Volume number
Issue number
Publisher DOI
Journal Issue
Author Karin S.Thorburn is a full time faculty member of Norwegian School of Economics. She is a visiting professor in the Finance Department of the Wharton School at the University of Pennsylvania.
Recommended citation