Do Corporate Global Environmental Standards Create or Destroy Market Value?

  • Dowell G
  • Hart S
  • Yeung B
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Abstract

Examines whether having a stringent global environmental standard contributes more to a multinational enterprise's (MNE's) firm value compared to using lower or host country standards - often lax to attract inward investment. Argues both sides. Cites studies showing that a proactive environmental policy links with superior stock performance. Explicates selection of 89 manufacturing/mining MNEs for examination, and proxies used for firm value and other cost factors. Groups the firms into those using local, US, or a global environmental standard during 1994-1997. Shows that local policy firms pollute more via the Toxic Inventory Release database. Employs Tobins 'q' that accommodates capital structure and intangibles such as marketing and R&D. Concludes from bivariate and multiple regression analyses that firms not adopting local standards have higher market values, and those employing a global standard have the highest 'q' and highest market value. Posits reasons to explain outcomes.

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Authors

  • Glen Dowell

  • Stuart Hart

  • Bernard Yeung

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