The Effects of Corporate Green Efforts for Sustainability: An Event Study Approach

This study investigates the long-term effects of corporate green efforts on the financial performances of the US public firms by using the ISO 14001 certification. Based on the natural resource based view, the rigorous event study was employed using 174 US public firms on NYSE (New York Stock Exchange) and NASDAQ (National Association of Securities Dealers Automated Quotations) to analyze the pre and post abnormal performances of the certification during the 1996–2010 period. The results indicate that ROI and Tobins’s Q showed the immediate positive response after the firms’ applying for the certification, implying that the market accepts the announcement of ISO 14001 as a positive signal. Asset turnover also showed positive abnormal performances for the short and long term. The results imply that the corporate green efforts are beneficial to the firm by improving sales and profitability, while the capital market does not clearly respond to these efforts in the long run.