Re-evaluating Corporate Greening: An Empirical Analysis of Environmental Publicity and Corporate Financial Performance

Abstract

This senior thesis presents an empirical examination of the relationship between public disclosure of corporate environmental responsibility and firm financial performance. Drawing on evidence from Newsweek’s Green Rankings, a highly publicized set of environmental responsibility ratings, this paper investigates the impact of the publication with three different empirical approaches. The first is a pair of cross-sectional studies focusing on comparing changes in internal financial efficiency before and after the publication of the 2012 edition. It finds more significant relationships between the report and financial performance in the pre-publication period over which the firms were evaluated. The second is an event study centered around the publication of the 2012 rankings which finds that a large portion of the companies experienced significant cumulative abnormal returns positively related to their environmental ratings. The last empirical study in this paper analyzes the effects of a publication error in Newsweek’s inaugural 2009 Green Rankings for ConAgra Foods. It finds lagged, negative significant cumulative abnormal returns following the initial lower rating but only weak evidence of positive abnormal returns following its upward correction. Overall, results weakly support the hypothesis that publicly disclosed environmental responsibility is more positively correlated with external valuations of financial performance than true, internal financial performance.