A STATISTICAL APPROACH TOWARDS ECONOMIC VIABILITY OF GOING GREEN

ABSTRACT

This paper argues if corporate actually experience any economic benefit by going green using statistical tools and press releases. On average, companies who are investing in corporate greening show a negative firm performance, as measured by stock profits. However, the correlation between environmental performance & economic performance is unstable with time. This paper concludes that no significant statistical relationship exists between these two variables; however, the same also depends on the type of industry to which the study is being carried out. The paper also identifies the benefits which a company can enjoy even after incorporating a high cost of greening. This paper suggests that the weak relationship between firm and environmental performance is partly attributable to variance in market reactions across press releases and industries. Firms in customer facing industries are likely to experience positive stock returns because of their enhanced market reputation. On the other hand, non-customer facing industries experience negative stock returns. This paper additionally suggests areas for additional analysis. Subsequent studies may utilize a bigger knowledge set that features each environmentally positive and negative announcements. A broader knowledge set may even be accustomed value press releases over a extended period. Lastly, future analysis may arrange to establish relationships between additive abnormal returns and shopper financial gain levels or tax code changes.

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