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We investigate the influence of environmental initiatives on firms’ anticipated economic performance using an event study methodology. Framing our arguments within an organizational reputation framework, we propose that, due to potential positive effects of these initiatives on firm performance (through increases in reputation), shareholders will react positively to announced environmental initiatives. Contrary to our hypothesis, we found no overall effect of announced environmental initiatives on stock returns. However, our findings indicate that reactions to product-driven initiatives are significantly different than reactions to process-driven ones.
Gilley et al. (Fri,) studied this question.