Skip to main content
SpringerLink
Log in

The Persistence of Green Goodwill

  • Chapter
  • First Online:
Enabling Environment

  • 648 Accesses

Abstract

Civil coercion has its limitations; government regulation is only as effective as enforcement and investors base their estimates of firm value on information available from the firms themselves and from other secondary sources. While voluntary disclosure is construed as being selective or incomplete or both, negative nonfinancial news such as details of fines imposed for environmental violation is reflected in lower stock prices for a short duration. This chapter evaluates the persistence of goodwill capital for a sample of Indian companies from select industries, graded by their environmental performance. It is observed that investor concern differs across industries, and that the correlation of environmental performance with firm valuation is, at best, weak and short-lived. Periodic scrutiny and announcement of industry environmental performance by appropriately equipped independent agencies could help coordinate and sustain stakeholder pressure on industry.

Adapt or Perish, now as ever, is nature’s inexorable imperative

-H.G. Wells

English author and historian (1866–1946)

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 39.99
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD 54.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info
Hardcover Book
USD 54.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Notes

  1. 1.

    This chapter is largely based on Srinivasan and Singh (2010).

  2. 2.

    http://www.cseindia.org/html/eyou/grp/grp_rating_method.htm

  3. 3.

    Plant level ranks are awarded within the cement industry, which are averaged to compute firm level ranks.

  4. 4.

    http://www.cmie.com/products/prowess/index.htm

  5. 5.

    Announcement dates for the GRP ranks are mentioned alongside the respective plots.

  6. 6.

    “Application of the ISO 14000 Family”, http://www.iso.org/iso/en/prods-services/otherpubs/iso14000/index.html

References

  • Aerts W, Cormier D, Magnan M (2008) Corporate environmental disclosure, financial markets and the media: an international perspective. Ecol Econ 64:643–659

    Article  Google Scholar 

  • Al-Tuwaijri Sulaiman A, Christensen TE, Hughes KE II (2004) The relations among environmental disclosure, environmental performance, and economic performance: a simultaneous equations approach. Acc Org Soc 29(5–6):447–471

    Article  Google Scholar 

  • Arora S, Cason TN (1995) An experiment in voluntary environmental regulation: participation in EPA’s 33/50 program. J Environ Econ Manage 28(3):271–286

    Article  Google Scholar 

  • Arora S, Gangopadhyay S (1995) Toward a theoretical model of voluntary overcompliance. J Econ Behav Org 28(3):289–309

    Article  Google Scholar 

  • Barron OE, Byard Donal KC, Riedl EJ (2002) High-technology intangibles and analysts’ forecasts. J Acc Res 40(2):289–312

    Article  Google Scholar 

  • Benn S, Dunphy D, Martin A (2009) Governance of environmental risk: new approaches to managing stakeholder involvement. J Environ Manage 90(4):1567–1575

    Article  Google Scholar 

  • Bugeja M, Gallery N (2006) Is older goodwill value relevant? Acc Finance 46(4):519–535

    Article  Google Scholar 

  • Chiao C, Hung W (2006) Stock market valuations of R&D and electronics firms during Taiwan’s recent economic transition. Dev Econ 44(1):53–78

    Article  Google Scholar 

  • Cleantech Venture Network (2006) http://cleantech.com/index.cfm?pageSRC=CleantechDefined.Accessed 3 Mar 2007

  • Cordero RR, Roth P, Da Silva L (2005) Economic growth or environmental protection? Environ Sci Policy 8(4):392–398

    Article  Google Scholar 

  • Cormier D, Magnan M (1997) Investors’ assessment of implicit environmental liabilities: an empirical investigation. J Acc Public Policy 16(2):215–241

    Article  Google Scholar 

  • Cormier D, Magnan M (2007) The revisited contribution of environmental reporting to investors’ valuation of a firm’s earnings: an international perspective. Ecol Econ 62(3–4):613–626

    Article  Google Scholar 

  • Cormier D, Magnan M, Morard B (1993) The impact of corporate pollution on market valuation: some empirical evidence. Ecol Econ 8(2):135–155

    Article  Google Scholar 

  • Dasgupta S, Laplante B, Mamingi N (2001) Pollution and capital markets in developing countries. J Environ Econ Manage 42(3):310–335

    Article  Google Scholar 

  • Dasgupta S, Hong JH, Benoit L, Mamingi N (2006) Disclosure of environmental violations and stock market in the Republic of Korea. Ecol Econ 58(4):759–777

    Article  Google Scholar 

  • Eiadat Y, Kelly A, Roche F, Eyadat H (2008) Green and competitive? An empirical test of the mediating role of environmental innovation strategy. J World Bus 43(2):131–145

    Article  Google Scholar 

  • Farzin YH, Kort PM (1998) Pollution abatement investment when environmental regulation is uncertain. FEEM working paper no. 75.98. FEEM, Milan

    Google Scholar 

  • Feldman SJ, Soyka PA, Ameer PG (1997) Does improving a firm’s environmental system and environmental performance result in a higher stock price? J Invest 6:87–97

    Article  Google Scholar 

  • Freedman M, Jaggi B (2005) Global warming, commitment to Kyoto protocol, and accounting disclosures by the largest global public firms from polluting industries. Int J Acc 40(3):215–232

    Article  Google Scholar 

  • Freedman M, Patten DM (2004) Evidence on the pernicious effect of financial report environmental disclosure. Acc Forum 28(1):27–41

    Article  Google Scholar 

  • Goodman SL, Det Norske Veritas (DNV) (1998) Is ISO 14001 an important element in business survival?. The Quality Magazine of Australia, June Ed

    Google Scholar 

  • Gupta S, Goldar B (2003) Do stockmarkets penalise environment-unfriendly behavior? Evidence from India. Centre for Civil Society, New Delhi

    Google Scholar 

  • Hamilton JT (1995) Pollution as news: media and stock market reactions to the toxics release inventory data. J Environ Econ Manage 28(1):98–113

    Article  Google Scholar 

  • Hart SL, Ahuja G (1998) Does it pay to be green? An empirical examination of the relationship between emission reduction and firm performance. Bus Strategy Environ 5(1):30–37

    Article  Google Scholar 

  • Hartl RF, Kort PM (1996) Capital accumulation of a firm facing an emissions tax. J Econ 63(1):1–23

    Article  Google Scholar 

  • Kristrom B, Lundgren T (2003) Abatement investments and green goodwill. Appl Econ 35(18):1915–1921

    Article  Google Scholar 

  • Lev B, Sougiannis T (1999) Penetrating the book-to-market black box: the R&D effect. J Bus Finance Acc 26(3–4):419–449

    Article  Google Scholar 

  • Lorraine NHJ, Collison DJ, Power DM (2004) An analysis of the stock market impact of environmental performance information. Acc Forum 28(1):7–26

    Article  Google Scholar 

  • Lundgren T (2003) A real options approach to abatement investments and green goodwill. Environ Resour Econ 25(1):17–31

    Article  Google Scholar 

  • Makower J (1993) The E-factor: the bottom-line approach to environmentally responsible business. Times Books, New York

    Google Scholar 

  • Matolcsy Z, Wyatt A (2006) Capitalized intangibles and financial analysts. Acc Finance 46(3):457–479

    Article  Google Scholar 

  • Morales A (2007) British airways’ carbon offsetting is ‘risible’, lawmakers say. Bloomberg, 23 July 2007

    Google Scholar 

  • Mueller DC, Supina D (2002) Goodwill capital. Small Bus Econ 19:233–253

    Article  Google Scholar 

  • Newell P (2005) Citizenship, accountability and community: the limits of the CSR agenda. Int Aff 81(3):541–557

    Article  Google Scholar 

  • Piasecki B, Asmus P (2006) Why wall street is greener than the white house. Renewable Energy Access, 19 Feb 2006. http://www.renewableenergyaccess.com/rea/news/story?id=43739

  • Porter ME, van der Linde C (1995) Green and competitive: ending the stalemate. Harvard Business Review, Sept–Oct Ed

    Google Scholar 

  • Reid EM, Toffel MW (2009) Responding to public and private politics: corporate disclosure of climate change strategies. Harvard Business School working paper no. 09–019, http://www.hbs.edu/research/pdf/09-019.pdf. Accessed 27 Feb 2012

  • Reinhardt FL (2000) Down to earth: applying business principles to environmental management. Harvard Business School Press, Boston

    Google Scholar 

  • Reuters Limited (2007) GE issues credit card aimed to cut emissions. Reuters, 25 July 2007

    Google Scholar 

  • Sokri A, Zaccour G (2006) A differential game of environmental regulation and information. Presented at the 12th international symposium on dynamic games and applications, France

    Google Scholar 

  • Sridharan (2004) Features: BT special: “India’s greenest companies”, Business Today, 24 Oct 2004

    Google Scholar 

  • Srinivasan S, Singh RK (2010) The persistence of green goodwill. Environment, development and sustainability 12(5):825–837, Springer Limited, UK

    Article  Google Scholar 

  • Sumiani Y, Haslinda Y, Lehman G (2007) Environmental reporting in a developing country: a case study on status and implementation in Malaysia. J Clean Prod 15(10):895–901

    Article  Google Scholar 

  • Swanda JR Jr (1990) Goodwill, going concern, stocks and flows: a prescription for moral analysis. J Bus Ethics 9(9):751–759

    Article  Google Scholar 

  • Wirl F, Noll J (2007) Voluntary (environmental) standards. J Econ Bus 59(4):275–285

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Verdurous Solutions Private Limited, Mysore, Karnataka, India

    Srinivasan Sunderasan

Authors
  1. Srinivasan Sunderasan
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Srinivasan Sunderasan .

Rights and permissions

Reprints and permissions

Copyright information

© 2013 Springer India

About this chapter

Cite this chapter

Sunderasan, S. (2013). The Persistence of Green Goodwill. In: Enabling Environment. Springer, India. https://doi.org/10.1007/978-81-322-0882-2_3

Download citation

Publish with us

Policies and ethics

Search

Navigation