환경경영이 기업가치에 미치는 영향
The Effect of Environmental Performance on the Market Value of Korean Firms

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서울대학교 경영대학 경영연구소
경영논집, Vol.40 No.3/4, pp. 89-121
With the fast industrialization, human beings have received the benefits of metarial

civilization. However an accelerated rate of exhaustion of natural resources, air

pollution, and water pollution has threatened human exixtence as well as sustainable

development. Companies can take this situation either as an opportunity or as a

challenge. Companies, which make environmentally harmful final products or

byproduct, are faced with demanding legal restriction. Companies, which manufacture

environmentaly friendly products, are welcomed with higher comsumer demand and

market growth potential.

No consensus has ever been made on how environment management affects

company performance. Some researchers and industry experts consider environment

management as financial burden, consequently being against aggressive environmental

invenstment. Other researchers, however, see clear benefits of environmental

investment such as improved corporate image, direct or indirect long-term cost

reduction, and lowered trade barrier. Depending on how companies understand the cost

and benefits of enviroenment management, companies will take their stand whether to

do just legal limit or to pursue environmental issues as strategic choice.

The objective of this study is to empirically measure the cost of environmental

accident and the economic value of environmental investment by implementing the

market model. This study is intended to help top Korean CEOs to make ROI considered strategic decisions on environmentaly friendly issues.

This study applies an event study to analyze the effect of environment performance

on the market value of Korean firms based on stock price, which shows future value

of companies. The results show that when companies announce their environmental

accidents, their announcements of those incidents will, in general, negatively influence

the market values of the companies. The companies lose, on average, 1.09% of their

market values on the day of the announcement. On the other hand, announcing an

environmental investment has no effect on the market. Additional finding is that

company size is a factor influencing the magnitude of capital market’s receptiveness

toward environmental performance. This suggests that companies need to recognize the

value of environmental invenstment and to take environment management as a

competitive advantage.
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College of Business Administration/Business School (경영대학/대학원)Institute of Management Research (경영연구소)경영논집경영논집 vol.40 (2006)
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