Factors influencing environmental investment from social issues to government mandates: A historical perspective.

摘要

Prior to the spate of legislation coming from government, the activist movement was and continues to be a major contributor in bringing many environmental issues to light through the use of proxy resolutions. Looked upon as minor irritants in corporate boardrooms in the past, these activists are becoming more powerful as their assets under management continue to grow. One of the major activist groups, public pension funds, have had the largest increase in assets under management growing by 560% from 1980 to 1989.; First, this paper analyzes the trend in the activist movement and its effect on corporate responsibility, and the implications of environmental legislation on future corporate profitability. These studies also provide information on the historical context of the activist movement and the greening of investments.; Second, this paper presents event studies on three major negative incidents, two environmental, the Exxon Valdez oil spill and the Union Carbide gas leak in Bhopal, and one social, the tainting of Johnson and Johnson's Tylenol capsules, and their affects on stock price behavior. The study examines and measures market efficiency subsequent to the occurrence of events studied here.; If the results of these studies show definite patterns of behavior, they would suggest that the investor may be able to take financial advantage of this information. The first part of this paper focuses on the activist movement and its effect on corporate policy, including a discussion of the implications of environmental compliance costs on future corporate profits. The second part focuses on the results of three event studies to analyze the affects of unexpected negative events on stock price behavior to determine whether investors may be able to take financial advantage of similar market inefficiencies.; If, in the first instance, a growing trend in the activist movement in bringing about corporate responsibility can be discerned, the investor may improve his/her long-run return through understanding the impact of the movement on corporate behavior and by actively participating in that movement through shareholder voting today, and, the implications of environmental legislation on corporate profits tomorrow.; In the second instance, if a pattern develops between stock price behavior and environmental incidents, such data could offer the investor an opportunity for financial reward.