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Environmental Performance and Share Price: an Empirical Study for Australian Industrial Corporations

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  • Alden, D. M.
  • Saleeba, J.

Abstract

There is evidence that investors value environmental performance disclosure by companies. This paper attempts to determine whether this environmental performance information affects share price. An index of environmental performance is constructed from a survey of the commitment of corporations to 'good' environmental performance. The inclusion of the index improves the explanatory power of most version of a Constant Growth Model used to estimate the determinants of share price of a sample of Australian industrial companies. However, the results also indicate that share price is not significantly affected by environmental performance. Among the reasons advanced to explain these results is the concern over the accuracy, consistency and reliability of environmental performance information provided by corporations. This leads to the recommendation that corporations undertake standardised corporate environmental performance reporting.

Suggested Citation

  • Alden, D. M. & Saleeba, J., 1997. "Environmental Performance and Share Price: an Empirical Study for Australian Industrial Corporations," Department of Economics - Working Papers Series 580, The University of Melbourne.
    • Handle: RePEc:mlb:wpaper:580
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    Keywords

    ENVIRONMENT ; AUSTRALIA;

    JEL classification:

    • K32 - Law and Economics - - Other Substantive Areas of Law - - - Energy, Environmental, Health, and Safety Law

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