Abstract
The main purpose of this work is to analyse whether ISO 14001 certification is interpreted by the capital market as a sign of environmental responsibility, modifying long-term efficiency expectations and the profitability of firms. Under competing assumptions that ISO 14001 certification is adopted by firms either proactively or reactively, we test competing hypotheses about how this certification affects the market value of firms. The analysis is based on a sample of 80 environmental certifications of the plant systems or processes of large Spanish firms which traded on the continuous market of the Madrid Stock Exchange from 1996 to 2002. Using event study methodology, we found that ISO 14001 certification has a negative effect on the market value of certain firms. Specifically, the results obtained seem to show that the market negatively views the allocation of resources to ISO 14001 certification in the case of less polluting and less internationalised firms. On the other hand, the results obtained do not suggest clear evidence that the economic impact of ISO 14001 certification is negative for more polluting and more internationalised firms.
Article PDF
Similar content being viewed by others
Avoid common mistakes on your manuscript.
References
Arora S, Gangopadhyay S (1995) Toward a theoretical model of voluntary overcompliance. J Econ Behav Organ 28: 298–309
Bansal P, Bogner W (2002) Deciding on ISO 14001: economics institutions and context. Long Range Plan 35: 269–290
Barney J (1991) Firm resources and sustained competitive advantage. J Manag 17: 99–120
Boiral O (2007) Corporate greening through ISO 14001: a rational myth?. Organ Sci 18: 127–146
Bozeman B (1987) All organizations are public. Jossey-Bass, San Francisco
Brown SJ, Warner JB (1980) Measuring security price performance. J Finan Econ 8: 205–258
Brown SJ, Warner JB (1985) Using daily stock returns: the case of event studies. J Finan Econ 14: 3–31
Chin K, Pun K (1999) Factors influencing ISO 14000 implementation in printed circuit board manufacturing industry in Hong Kong. J Environ Plan Manag 42: 123–134
Corrado C (1989) A non parametric test for abnormal security price performance in event studies. J Finan Econ 23: 385–395
Christainsen GB, Haveman RH (1981) The contribution of environmental regulations to the slowdown in productivity growth. J Environ Econ Manag 8: 381–390
Darnall N (2006) Why firms mandate ISO 14001 certification. Bus Soc 45: 354–381
Darnall N, Edwards D (2006) Predicting the cost of environmental management system adoption: the role of capabilities resources and ownership structure. Strateg Manag J 27: 301–320
Darnall N, Ringling D, Andrews R, Amaral D (2000) Environmental management systems: opportunities for improved environmental and business strategy?. Environ Qual Manag 9: 1–9
Darnall N, Henriques I, Sadorsky P (2007) Do environmental systems improve business performance in an international setting?. J Int Manag 14(4): 364–376
Dasgupta S, Ho Hong J, Laplante B, Mamingi N (2006) Disclosure of environmental violations and stock market in the Republic of Korea. Ecol Econ 58: 759–777
De Backer P (1999) L‘impact économique et l‘efficacité environnementale de la certification ISO 14001/EMAS des entreprises industrielles. ADEME, Paris
Delgado JM, Ramírez M, Espitia M (2004) Intangible resources as a key factor in the internationalisation of Spanish firms. J Econ Behav Organ 53: 477–494
Delmas M (2001) Stakeholders and competitive advantage: the case of ISO 14001. Prod Oper Manag 10: 343–358
DiMaggio PW, Powell W (1983) The iron cage revisited: institutional isomorphism and collective rationality in organizational fields. Am Sociol Rev 48: 147–160
Dowell G, Hart S, Yeung B (2000) Do corporate global environmental standards create or destroy market value?. Manag Sci 46: 1059–1074
Fama E (1970) Efficient capital markets: a review of theory and empirical work. J Finan 25: 383–417
Feldman SJ, Soyka P, Ameer P (1997) Does improving a firm’s environmental management system and environmental performance result in a Higher stock price?. J Invest 6: 87–97
Filbeck G, Gorman RF (2004) The relationship between the environmental and financial performance of public utilities. Environ Res Econ 29: 137–157
González F (1995) La reacción de los precios de las acciones ante anuncios de dividendos: la evidencia empírica en el mercado español de valores. Investig Econ 2: 249–268
González V (1997) La valoración por el mercado de capitales español de la financiación bancaria y de las emisiones de obligaciones. Investig Econ 82: 111–128
Grant R (1991) The resource based theory of competitive advantage: implications for strategy formulation. Calif Manag Rev 33: 114–135
Guenster N, Derwall J, Bauer R, Koedijk K (2006) The economic value of corporate eco-efficiency. Working paper. http://ssrn.com/abstract=675628
Gupta S, Goldar B (2005) Do stock markets penalize environment-unfriendly behaviour?. Evidence from India. Ecol Econ 52: 81–95
Hamilton JT (1995) Pollution as news: media and stock market reactions to the toxics release inventory data. J Environ Econ Manag 28: 98–113
Hart S, Ahuja G (1996) Does it pay to be green? An empirical examination of the relationship between emission reduction and firm performance. Bus Strategy Environ 5: 30–37
Jaffe A, Peterson S, Portney P, Stavins R (1995) Environmental regulation and the competitiveness of U.S. manufacturing: what does the evidence tell us?. J Econ Lit 33: 132–163
Khanna M, Quimio W, Bojilova D (1998) Toxic release information: a policy tool for environmental protection. J Environ Econ Manag 36: 243–266
Kothari SP, Warner J (2007) Econometrics of even studies. In: (eds) In: Espen Eckbo B (ed) Handbook of corporate finance. North-Holland, Elsevier, pp, pp 3–36
King A, Lenox M (2001) Does it really pay to be green?. An empirical study of firm environmental and financial performance. J Ind Ecol 5: 105–116
King A, Lenox M (2002) Exploring the locus of profitable pollution reduction. Manag Sci 48: 289–299
Klassen T, Mclaughlin C (1996) The impact of environmental management on firm performance. Manag Sci 42: 1199–1214
Klassen R, Whybark D (1999) The impact of environmental technologies on manufacturing performance. Acad Manag J 42: 599–615
Konar S, Cohen MA (1997) Information as regulation: the effect of community right to know laws on toxic emissions. J Environ Econ Manag 32: 109–124
Konar S, Cohen MA (2001) Does the market value environmental performance. Rev Econ Stat 83: 281–289
Link S, Naveh E (2006) Standardization and discretion: does the environmental standard ISO 14001 lead to performance benefits?. IEEE Trans Eng Manag 53: 508–519
Mckinlay A (1997) Event studies in economics and finance. J Econ Lit 35: 13–39
McWilliams A, Siegel D (1997) Event studies in management research: theoretical and empirical issues. Acad Manag J 40: 626–658
Melnyk S, Sroufe R, Calantone R (2002) Assessing the impact of environmental management systems on corporate and environmental performance. J Oper Manag 336: 1–23
Montabon F, Melnyk S, Sroufe R, Calantone R (2000) ISO 14000: assessing its perceived impact on corporate purchasing performance. J Supply Chain Manag 36: 4–15
Nehrt C (1996) Timing and intensity effects of environmental investments. Strateg Manag J 17: 535–547
Noci G, Verganti R (1999) Managing green product innovation and small firms. R&D Manag 29: 3–15
Patell J (1976) Corporate forecast of earnings per share and stock price behavior: empirical tests. J Account Res autumn 246–274
Porter M (1991) America’s green strategy. Sci Am 264: 168
Porter M, Van der Linde C (1995) Green and competitive: ending the stalemate. Harv Bus Rev 73: 120–134
Potoski M, Prakash A (2005) with weak swords: ISO 14001 and facilities’ environmental performance. J Policy Anal Manag 24: 745–770
Radonjic G, Tominc P (2006) The impact and significance of ISO 14001 certification on the adoption of new technologies; the case of Slovenia. Manag Environ Qual 17: 707–727
Rondinelli D, Vastag G (2000) Panacea, common sense, or just a label? The value of ISO 14001 Environmental Management Systems. Eur Manag J 18: 499–510
Ruiz FJ, Espitia M (1996) La formación de precios de las acciones alrededor del pago de dividendos en el Mercado de capitales español. R Esp de Fin y contab 25: 179–198
Rumelt R (1984) Towards a strategic theory of the firm. In: Lamb RB (eds) Competitive strategic management. Prentice-Hall, Englewood Cliffs, NJ, pp 556–570
Russo M, Fouts P (1997) A resource-based perspective on corporate environmental performance and profitability. Acad Manag J 40: 534–559
Russo M, Harrison N (2001) An empirical study of the impact of ISO 14001 registration on emissions performance, Paper presented at the Ninth greening of industry network annual conference, Bangkok, Thailand. http://lcb1.uoregon.edu/mrusso/Text-GINa.htm
Sarkis J, Kitazawa S (2000) The relationship between ISO14001 and continuous source reduction programs. Int J Oper Prod Manag 20: 225–248
Scott WR (1992) Organizations: rational natural and open systems. Prentice Hall, Englewood Cliffs, NJ
Sharma S, Vredenburg H (1998) Proactive corporate environmental strategy and the development of competitively valuable organizational capabilities. Strateg Manag J 19: 729–753
Sharpe W (1964) Capital asset prices: A theory of market equilibrium under conditions of risk. J Finan 19(3): 425–442
Telle K (2006) It pays to be green—a premature conclusion?. Environ Resour Econ 35: 195–220
Toms JS (2002) Firms resources, quality signals and the determinants of corporate environmental reputation: some UK evidence. Br Account Rev 34: 257–282
Wagner M, Schaltegger S, Wehrmeyer W (2001) The relationship between the environmental and economic performance of firms: what does theory propose and what does empirical evidence tell us?. Greener Manag Int 34: 95–108
Xepapadeas A, Zeeuw A (1999) Environmental policy and competitiveness: the porter hypothesis and the composition of capital. J Environ Econ Manag 37: 165–182
Ziegler A, Schröder M, Rennings K (2007) The effect of environmental and social performance on the stock performance of European corporations. Environ Resour Econ 37: 661–680
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Cañón-de-Francia, J., Garcés-Ayerbe, C. ISO 14001 Environmental Certification: A Sign Valued by the Market?. Environ Resource Econ 44, 245–262 (2009). https://doi.org/10.1007/s10640-009-9282-8
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s10640-009-9282-8