IDEAS home Printed from https://ideas.repec.org/a/gam/jjrfmx/v12y2019i1p21-d201669.html
   My bibliography  Save this article

Valuation of Environmental Management Standard ISO 14001: Evidence from an Emerging Market

Author

Listed:
  • Hammad Riaz

    (Department of Management Sciences, COMSATS University, Islamabad, Park Road, Islamabad 44000, Pakistan)

  • Abubakr Saeed

    (Department of Management Sciences, COMSATS University, Islamabad, Park Road, Islamabad 44000, Pakistan)

  • Muhammad Saad Baloch

    (Department of Management Sciences, COMSATS University, Islamabad, Park Road, Islamabad 44000, Pakistan)

  • Nasrullah

    (Department of Management Sciences, COMSATS University, Islamabad, Park Road, Islamabad 44000, Pakistan)

  • Zeeshan Ahmad Khan

    (Department of Planning and Development, Pir Mehr Ali Shah, Arid Agriculture University, Rawalpindi 44000, Pakistan)

Abstract

ISO 14001 (Environmental Management Standard) helps corporations to build legitimacy and goodwill, and can be also viewed as an organizational response to institutional pressure to act proactively towards the environment. The purpose of this paper is to investigate how investors in the emerging country value voluntary environmental management standard ISO 14001 certification. The impact of voluntary environmental management standard ISO 14001 on market performance is still not clear. By using event study methodology, this study matched ISO-certified firms with non-certified ones based on three different matching principles that include return on assets, size, and industry. The findings indicated that investors negatively valued ISO 14001 in both the short and long run. The study recommended policy implications for managers, policy makers, and non-government organizations.

Suggested Citation

  • Hammad Riaz & Abubakr Saeed & Muhammad Saad Baloch & Nasrullah & Zeeshan Ahmad Khan, 2019. "Valuation of Environmental Management Standard ISO 14001: Evidence from an Emerging Market," JRFM, MDPI, vol. 12(1), pages 1-14, January.
    • Handle: RePEc:gam:jjrfmx:v:12:y:2019:i:1:p:21-:d:201669
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/1911-8074/12/1/21/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/1911-8074/12/1/21/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ivan Montiel & Bryan W. Husted & Petra Christmann, 2012. "Using private management standard certification to reduce information asymmetries in corrupt environments," Strategic Management Journal, Wiley Blackwell, vol. 33(9), pages 1103-1113, September.
    2. Sitikantha Parida & Zhihong Wang, 2018. "Financial Crisis and Corporate Social Responsible Mutual Fund Flows," IJFS, MDPI, vol. 6(1), pages 1-19, January.
    3. Bryan W Husted & Ivan Montiel & Petra Christmann, 2016. "Effects of local legitimacy on certification decisions to global and national CSR standards by multinational subsidiaries and domestic firms," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 47(3), pages 382-397, April.
    4. repec:cfe:wpcefa:2016_01 is not listed on IDEAS
    5. Magali A. Delmas & Maria J. Montes‐Sancho, 2010. "Voluntary agreements to improve environmental quality: symbolic and substantive cooperation," Strategic Management Journal, Wiley Blackwell, vol. 31(6), pages 575-601, June.
    6. Sime Curkovic & Robert Sroufe, 2011. "Using ISO 14001 to promote a sustainable supply chain strategy," Business Strategy and the Environment, Wiley Blackwell, vol. 20(2), pages 71-93, February.
    7. BLOME, Constantin & PAULRAJ, Antony & DE JONG, Pieter, 2014. "The financial impact of ISO 14001 certification: top-line, bottom-line, or both?," LIDAM Reprints CORE 2709, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    8. Olivier Boiral, 2003. "ISO 9000: Outside the Iron Cage," Organization Science, INFORMS, vol. 14(6), pages 720-737, December.
    9. Prayag Lal Yadav & Seung Hun Han & Jae Jeung Rho, 2016. "Impact of Environmental Performance on Firm Value for Sustainable Investment: Evidence from Large US Firms," Business Strategy and the Environment, Wiley Blackwell, vol. 25(6), pages 402-420, September.
    10. Fisher-Vanden, Karen & Thorburn, Karin S., 2011. "Voluntary corporate environmental initiatives and shareholder wealth," Journal of Environmental Economics and Management, Elsevier, vol. 62(3), pages 430-445.
    11. Docking, Diane Scott & Dowen, Richard J, 1999. "Market Interpretation of ISO 9000 Registration," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 22(2), pages 147-160, Summer.
    12. Andrew A. King & Michael J. Lenox, 2001. "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," Journal of Industrial Ecology, Yale University, vol. 5(1), pages 105-116, January.
    13. Heather Dixon-Fowler & Daniel Slater & Jonathan Johnson & Alan Ellstrand & Andrea Romi, 2013. "Beyond “Does it Pay to be Green?” A Meta-Analysis of Moderators of the CEP–CFP Relationship," Journal of Business Ethics, Springer, vol. 112(2), pages 353-366, January.
    14. Carhart, Mark M, 1997. "On Persistence in Mutual Fund Performance," Journal of Finance, American Finance Association, vol. 52(1), pages 57-82, March.
    15. Zhong, Ninghua, 2015. "Corporate governance of Chinese privatized firms: Evidence from a survey of non-listed enterprises," Journal of Comparative Economics, Elsevier, vol. 43(4), pages 1101-1121.
    16. Sadia Majeed & Tariq Aziz & Saba Saleem, 2015. "The Effect of Corporate Governance Elements on Corporate Social Responsibility (CSR) Disclosure: An Empirical Evidence from Listed Companies at KSE Pakistan," IJFS, MDPI, vol. 3(4), pages 1-27, November.
    17. Charles J. Corbett & María J. Montes-Sancho & David A. Kirsch, 2005. "The Financial Impact of ISO 9000 Certification in the United States: An Empirical Analysis," Management Science, INFORMS, vol. 51(7), pages 1046-1059, July.
    18. Aravind, Deepa & Christmann, Petra, 2011. "Decoupling of Standard Implementation from Certification: Does Quality of ISO 14001 Implementation Affect Facilities’ Environmental Performance?," Business Ethics Quarterly, Cambridge University Press, vol. 21(1), pages 73-102, January.
    19. Petra Christmann & Glen Taylor, 2006. "Firm self-regulation through international certifiable standards: determinants of symbolic versus substantive implementation," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 37(6), pages 863-878, November.
    20. Fama, Eugene F, 1991. "Efficient Capital Markets: II," Journal of Finance, American Finance Association, vol. 46(5), pages 1575-1617, December.
    21. Diane Scott Docking & Richard J. Dowen, 1999. "Market Interpretation Of Iso 9000 Registration," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 22(2), pages 147-160, June.
    22. Steven Globerman & Daniel Shapiro, 2009. "Economic and strategic considerations surrounding Chinese FDI in the United States," Asia Pacific Journal of Management, Springer, vol. 26(1), pages 163-183, March.
    23. Sang M. Lee & Yonghwi Noh & Donghyun Choi & Jin Sung Rha, 2017. "Environmental Policy Performances for Sustainable Development: From the Perspective of ISO 14001 Certification," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 24(2), pages 108-120, March.
    24. He, Wenlong & Liu, Chong & Lu, Jiangyong & Cao, Jing, 2015. "Impacts of ISO 14001 adoption on firm performance: Evidence from China," China Economic Review, Elsevier, vol. 32(C), pages 43-56.
    25. Magali A. Delmas & Michael W. Toffel, 2008. "Organizational responses to environmental demands: opening the black box," Strategic Management Journal, Wiley Blackwell, vol. 29(10), pages 1027-1055, October.
    26. Barber, Brad M. & Lyon, John D., 1997. "Detecting long-run abnormal stock returns: The empirical power and specification of test statistics," Journal of Financial Economics, Elsevier, vol. 43(3), pages 341-372, March.
    27. Barber, Brad M. & Lyon, John D., 1996. "Detecting abnormal operating performance: The empirical power and specification of test statistics," Journal of Financial Economics, Elsevier, vol. 41(3), pages 359-399, July.
    28. Lo, Chris K.Y. & Yeung, Andy C.L. & Cheng, T.C.E., 2012. "The impact of environmental management systems on financial performance in fashion and textiles industries," International Journal of Production Economics, Elsevier, vol. 135(2), pages 561-567.
    29. Jiangning Zhao, 2008. "The effect of the ISO-14001 environmental management system on corporate financial performance," International Journal of Business Excellence, Inderscience Enterprises Ltd, vol. 1(1/2), pages 210-230.
    30. John D. Lyon & Brad M. Barber & Chih‐Ling Tsai, 1999. "Improved Methods for Tests of Long‐Run Abnormal Stock Returns," Journal of Finance, American Finance Association, vol. 54(1), pages 165-201, February.
    31. Matthew Potoski & Aseem Prakash, 2005. "Green Clubs and Voluntary Governance: ISO 14001 and Firms' Regulatory Compliance," American Journal of Political Science, John Wiley & Sons, vol. 49(2), pages 235-248, April.
    32. Glen Dowell & Stuart Hart & Bernard Yeung, 2000. "Do Corporate Global Environmental Standards Create or Destroy Market Value?," Management Science, INFORMS, vol. 46(8), pages 1059-1074, August.
    33. Hayam Wahba, 2010. "How do institutional shareholders manipulate corporate environmental strategy to protect their equity value? A study of the adoption of ISO 14001 by Egyptian firms," Business Strategy and the Environment, Wiley Blackwell, vol. 19(8), pages 495-511, December.
    34. Hong, Harrison & Kacperczyk, Marcin, 2009. "The price of sin: The effects of social norms on markets," Journal of Financial Economics, Elsevier, vol. 93(1), pages 15-36, July.
    35. Michael V. Russo, 2009. "Explaining the impact of ISO 14001 on emission performance: a dynamic capabilities perspective on process and learning," Business Strategy and the Environment, Wiley Blackwell, vol. 18(5), pages 307-319, July.
    36. Fama, Eugene F & French, Kenneth R, 1996. "Multifactor Explanations of Asset Pricing Anomalies," Journal of Finance, American Finance Association, vol. 51(1), pages 55-84, March.
    37. Pieter Jong & Antony Paulraj & Constantin Blome, 2014. "The Financial Impact of ISO 14001 Certification: Top-Line, Bottom-Line, or Both?," Journal of Business Ethics, Springer, vol. 119(1), pages 131-149, January.
    38. Olivier Boiral, 2007. "Corporate Greening Through ISO 14001: A Rational Myth?," Organization Science, INFORMS, vol. 18(1), pages 127-146, February.
    39. Wassim Dbouk & Dawei Jin & Haizhi Wang & Jianrong Wang, 2018. "Corporate Social Responsibility and Rule 144A Debt Offerings: Empirical Evidence," IJFS, MDPI, vol. 6(4), pages 1-18, November.
    40. Yee, Rachel W.Y. & Yeung, Andy C.L. & Edwin Cheng, T.C., 2010. "An empirical study of employee loyalty, service quality and firm performance in the service industry," International Journal of Production Economics, Elsevier, vol. 124(1), pages 109-120, March.
    41. Robert D. Klassen & Curtis P. McLaughlin, 1996. "The Impact of Environmental Management on Firm Performance," Management Science, INFORMS, vol. 42(8), pages 1199-1214, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Farida Saleem & C. Gopinath & Amira Khattak & Saiqa Saddiqa Qureshi & Alawiya Allui & Ahmad Adeel, 2020. "Corporate Environmentalism: An Emerging Economy Perspective," Sustainability, MDPI, vol. 12(15), pages 1-17, August.
    2. Obey Dzomonda & Olawale Fatoki, 2020. "Environmental Sustainability Commitment and Financial Performance of Firms Listed on the Johannesburg Stock Exchange (JSE)," IJERPH, MDPI, vol. 17(20), pages 1-21, October.
    3. Ionut Viorel Herghiligiu & Ioan-Bogdan Robu & Marius Pislaru & Adrian Vilcu & Anca Laura Asandului & Silvia Avasilcăi & Catalin Balan, 2019. "Sustainable Environmental Management System Integration and Business Performance: A Balance Assessment Approach Using Fuzzy Logic," Sustainability, MDPI, vol. 11(19), pages 1-30, September.
    4. Paulius Šūmakaris & Kristina Kovaitė & Renata Korsakienė, 2023. "An Integrated Approach to Evaluating Eco-Innovation Strategies from the Perspective of Strategic Green Transformation: A Case of the Lithuanian Furniture Industry," Sustainability, MDPI, vol. 15(11), pages 1-33, June.
    5. Keigo Fujikura & Akitsu Oe, 2023. "The Influence of Firms’ Pragmatic Legitimacy on Investors’ Perceptions of Their Environmental Protection Activities," Sustainability, MDPI, vol. 15(18), pages 1-18, September.
    6. Dalia Fadly, 2020. "Greening Industry in Vietnam: Environmental Management Standards and Resource Efficiency in SMEs," Sustainability, MDPI, vol. 12(18), pages 1-27, September.
    7. Gabriel Cachón‐Rodríguez & Alicia Blanco‐González & Camilo Prado‐Román & Francisco Diez‐Martin, 2021. "Sustainability actions, employee loyalty, and the awareness: The mediating effect of organization legitimacy," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(7), pages 1730-1739, October.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hammad Riaz & Abubakr Saeed, 2020. "Impact of environmental policy on firm's market performance: The case of ISO 14001," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 27(2), pages 681-693, March.
    2. Pablo Arocena & Raquel Orcos & Fedaous Zouaghi, 2021. "The impact of ISO 14001 on firm environmental and economic performance: The moderating role of size and environmental awareness," Business Strategy and the Environment, Wiley Blackwell, vol. 30(2), pages 955-967, February.
    3. Yonghwi Noh, 2019. "The Effects of Corporate Green Efforts for Sustainability: An Event Study Approach," Sustainability, MDPI, vol. 11(15), pages 1-15, July.
    4. Wenlong He & Wei Yang & Seong-jin Choi, 2018. "The Interplay Between Private and Public Regulations: Evidence from ISO 14001 Adoption Among Chinese Firms," Journal of Business Ethics, Springer, vol. 152(2), pages 477-497, October.
    5. Ying Zhang & Hongfei Ruan & Guiyao Tang & Li Tong, 2021. "Power of sustainable development: Does environmental management system certification affect a firm's access to finance?," Business Strategy and the Environment, Wiley Blackwell, vol. 30(8), pages 3772-3788, December.
    6. Mark Anthony Camilleri, 2022. "The rationale for ISO 14001 certification: A systematic review and a cost–benefit analysis," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 29(4), pages 1067-1083, July.
    7. Ionut Viorel Herghiligiu & Ioan-Bogdan Robu & Marius Pislaru & Adrian Vilcu & Anca Laura Asandului & Silvia Avasilcăi & Catalin Balan, 2019. "Sustainable Environmental Management System Integration and Business Performance: A Balance Assessment Approach Using Fuzzy Logic," Sustainability, MDPI, vol. 11(19), pages 1-30, September.
    8. Ding, Li & Lam, Hugo K.S. & Cheng, T.C.E. & Zhou, Honggeng, 2018. "A review of short-term event studies in operations and supply chain management," International Journal of Production Economics, Elsevier, vol. 200(C), pages 329-342.
    9. Pieter Jong & Antony Paulraj & Constantin Blome, 2014. "The Financial Impact of ISO 14001 Certification: Top-Line, Bottom-Line, or Both?," Journal of Business Ethics, Springer, vol. 119(1), pages 131-149, January.
    10. Wenlong He & Rui Shen, 2019. "ISO 14001 Certification and Corporate Technological Innovation: Evidence from Chinese Firms," Journal of Business Ethics, Springer, vol. 158(1), pages 97-117, August.
    11. Kothari, S. P., 2001. "Capital markets research in accounting," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 105-231, September.
    12. Yang, Zhenbing & Shao, Shuai & Yang, Lili, 2021. "Unintended consequences of carbon regulation on the performance of SOEs in China: The role of technical efficiency," Energy Economics, Elsevier, vol. 94(C).
    13. Yanying Chen & Liang Ping & Feng Helen Liang, 2023. "Industry Reputation Crisis and Firm Certification: A Co-evolution Perspective," Journal of Business Ethics, Springer, vol. 186(4), pages 761-780, September.
    14. Rocio Carrillo-Labella & Fatiha Fort & Manuel Parras-Rosa, 2020. "Motives, Barriers, and Expected Benefits of ISO 14001 in the Agri-Food Sector," Sustainability, MDPI, vol. 12(5), pages 1-17, February.
    15. Sang M. Lee & Yonghwi Noh & Donghyun Choi & Jin Sung Rha, 2017. "Environmental Policy Performances for Sustainable Development: From the Perspective of ISO 14001 Certification," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 24(2), pages 108-120, March.
    16. Treacy, Raymond & Humphreys, Paul & McIvor, Ronan & Lo, Chris, 2019. "ISO14001 certification and operating performance: A practice-based view," International Journal of Production Economics, Elsevier, vol. 208(C), pages 319-328.
    17. Iñaki Heras‐Saizarbitoria & German Arana & Olivier Boiral, 2016. "Outcomes of Environmental Management Systems: the Role of Motivations and Firms’ Characteristics," Business Strategy and the Environment, Wiley Blackwell, vol. 25(8), pages 545-559, December.
    18. Frances Bowen, 2019. "Marking Their Own Homework: The Pragmatic and Moral Legitimacy of Industry Self-Regulation," Journal of Business Ethics, Springer, vol. 156(1), pages 257-272, April.
    19. Suhong Li & Thomas Ngniatedema & Fang Chen, 2017. "Understanding the Impact of Green Initiatives and Green Performance on Financial Performance in the US," Business Strategy and the Environment, Wiley Blackwell, vol. 26(6), pages 776-790, September.
    20. Daniel, Kent & Hirshleifer, David & Teoh, Siew Hong, 2002. "Investor psychology in capital markets: evidence and policy implications," Journal of Monetary Economics, Elsevier, vol. 49(1), pages 139-209, January.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jjrfmx:v:12:y:2019:i:1:p:21-:d:201669. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.