Does the market value corporate environmental responsibility? An empirical examination

Abstract Although researchers have applied different theoretical perspectives to illustrate the relationship between corporate environmental responsibility and profitability, to date theories are contested and empirical findings are inconclusive. Therefore, the aim of this research was to present empirical evidence regarding the influence of engaging in environmental responsibility on corporate market value, as the first study to be applied in the Egyptian context. The findings demonstrate that the market compensates those firms that care for their environment, as environmental responsibility exerted a positive and significant coefficient on the firm market value measured by Tobin's q ratio. This aligns stakeholder theory as well as resource‐based theory arguments, and provides supporting evidence for those studies that have concluded that it pays to be environmentally responsive. Copyright © 2007 John Wiley & Sons, Ltd and ERP Environment.