The value for service industry firms of environmental initiatives

摘要

Purpose - This study aims to examine the impact of taking environmental initiatives on the returnsrnfor service companies.rnDesign/methodology/approach - The authors gathered data for firms that are recognized forrntheir leadership in environmental responsibility using a well-known social responsibility ranking list.rnThese data were used to compare with those that were ranked high on the index with those that werernranked lower, using Jensen's alpha and Sharpe ratio performance measures relative to a benchmark.rnFindings - The upper- and lower-ranked socially responsible firms had significantly higher riskrnadjusted returns and superior performance than the benchmark. Additionally, there is evidence thatrnfirms ranked in the lower group are better valued overall.rnResearch limitations/implications - A higher return for socially responsible firms suggests thatrnpublic investors value environmentally-friendly firms more highly today. Future research could buildrnon this study by examining additional performance measures including four-factor models andrnconditional variance.rnPractical implications - The study suggests that a service company's commitment to environmentalrninitiatives and the recognition of its commitment is an important signal today for the investor.rnOriginality/value - While prior research has considered manufacturing companies, this is the firstrnstudy to examine the impact of a commitment to environmental initiatives for service industry firms.rnThe findings of the empirical examination support the benefits of green initiatives to a significantrncomponent of the US economy.