Abstract
The purpose of this article is to examine empirically the impact of environmental certification on firm financial performance (FP). The main question is whether there is a “green premium” for certified firms, and, if so, for what kind of certification. We analyze the short-run and the long-run stock price performance using an event-study methodology on a sample of Canadian and U.S. firms. The results of short-run event abnormal returns indicate that forest certification does not have any significant impact on firm FP regardless of the certification system carried out by firms. Unlike the short-run results, the long-run post-event abnormal returns suggest that forest certification has, on average, a negative impact on firm FP. However, the impact of forest certification on firm FP depends on who grants the certification, since only industry-led certification (Sustainable Forestry Initiative, Canadian Standards Association and ISO14001) are penalized by financial markets, whereas non-governmental organizations–led Forest Stewardship Council certification is not.
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Abbreviations
- AF&PA:
-
American Forest and Paper Association
- ADR:
-
American Depositary Receipts
- AR:
-
Abnormal return
- BHAR:
-
Buy-and-hold abnormal return
- BVC:
-
Bureau Veritas Certification
- CAR:
-
Cumulative abnormal return
- CD:
-
Certification announcement date
- CEP:
-
Council on Economic Priorities
- CSA:
-
Canadian Standards Association
- EP:
-
Environmental performance
- FP:
-
Financial performance
- FSC:
-
Forest Stewardship Council
- ISO:
-
International Organization of Standardization
- KPMG:
-
KPMG Forest Certification Services Inc
- NGO:
-
Non-governmental organizations
- PWC:
-
PricewaterhouseCoopers LLP
- QMI:
-
Quality Management Institute
- SFI:
-
Sustainable Forestry Initiative
- SCS:
-
Scientific Certification Systems
- SGS:
-
SGS Systems & Services Certification
- SIC:
-
Standard Industrial Classification
- SW:
-
SmartWood, Rainforest Alliance
- TRI:
-
Toxic Release Inventory
- UNCED:
-
United Nations Conference in Environment and Development
- WWF:
-
World Wildlife Fund
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Acknowledgments
Support for this research from the Social Sciences and Humanities Research Council (SSHRC) of Canada is gratefully acknowledged. The authors would like to thank Guy Charest, Raymond Theoret and anonymous reviewers for their helpful comments and suggestions on former versions of this article. All errors are our own.
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Authors are from the École des sciences de la gestion (ESG), UniversitÉ du QuÉbec à MontrÉal (UQAM). Kais Bouslah is a Ph.D. Candidate (Finance). Bouchra M’Zali and Maher Kooli are professors at the Department of Finance. Marie-France Turcotte is a professor at the Department of Strategy, Social and Environmental Responsibility.
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Bouslah, K., M’Zali, B., Turcotte, MF. et al. The Impact of Forest Certification on Firm Financial Performance in Canada and the U.S.. J Bus Ethics 96, 551–572 (2010). https://doi.org/10.1007/s10551-010-0482-5
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DOI: https://doi.org/10.1007/s10551-010-0482-5