Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

The informational value of Toxics Release Inventory performance

The informational value of Toxics Release Inventory performance Purpose – The study aims to evaluate the informational value to investors of the Toxics Release Inventory (TRI) as an external outcome measure of corporate environmental performance. Emphasis is placed on the market response differences between three highly polluting industries. Design/methodology/approach – The study uses pooled cross‐sectional, time‐series data and an event study methodology to examine the effects of TRI emissions on abnormal market returns. Findings – There is empirical evidence that market reactions to TRI emissions information vary by industry. Investors reward decreases in emissions in the electric utility industry, but do not penalize increases. In the chemical industry, increases in emissions are penalized, but decreases are not rewarded. Models do not capture any reaction to emissions changes in the pulp and paper industry. These results may be explained by the significant difference between industries in the US percentage of total firm sales. Research limitations/implications – This research analyzes only data from US firms in three industries and evaluates a single measure of environmental performance, TRI. The value of TRI information is measured for one stakeholder group. Future research should attempt to address these limitations. Practical implications – The results suggest that research on the effects of environmental performance on market‐based measures should estimate models by industry, whenever possible. From a public policy perspective, the results suggest that regulators may want to consider alternative methods of reducing chemical emissions beyond TRI disclosure in the chemicals and pulp and paper industries. Originality/value – The study distinguishes between the value of TRI as a “message service” and the content of the “message”. TRI may provide information of value to investors, but performance changes may not be sufficient to merit a price response. The study also specifically addresses industry differences and clearly shows how average coefficients can be misleading relating to this one environmental performance indicator. The use of pooled industry coefficients may lead to inefficient resource allocation decisions within industries and ineffective policies at the regulatory level. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Sustainability Accounting, Management and Policy Journal Emerald Publishing

The informational value of Toxics Release Inventory performance

Download PDF
24 pages

Loading next page...
 
/lp/emerald-publishing/the-informational-value-of-toxics-release-inventory-performance-I7Np8JwYe5
Publisher
Emerald Publishing
Copyright
Copyright © 2013 Emerald Group Publishing Limited. All rights reserved.
ISSN
2040-8021
DOI
10.1108/SAMPJ-01-2011-0003
Publisher site
See Article on Publisher Site

Abstract

Purpose – The study aims to evaluate the informational value to investors of the Toxics Release Inventory (TRI) as an external outcome measure of corporate environmental performance. Emphasis is placed on the market response differences between three highly polluting industries. Design/methodology/approach – The study uses pooled cross‐sectional, time‐series data and an event study methodology to examine the effects of TRI emissions on abnormal market returns. Findings – There is empirical evidence that market reactions to TRI emissions information vary by industry. Investors reward decreases in emissions in the electric utility industry, but do not penalize increases. In the chemical industry, increases in emissions are penalized, but decreases are not rewarded. Models do not capture any reaction to emissions changes in the pulp and paper industry. These results may be explained by the significant difference between industries in the US percentage of total firm sales. Research limitations/implications – This research analyzes only data from US firms in three industries and evaluates a single measure of environmental performance, TRI. The value of TRI information is measured for one stakeholder group. Future research should attempt to address these limitations. Practical implications – The results suggest that research on the effects of environmental performance on market‐based measures should estimate models by industry, whenever possible. From a public policy perspective, the results suggest that regulators may want to consider alternative methods of reducing chemical emissions beyond TRI disclosure in the chemicals and pulp and paper industries. Originality/value – The study distinguishes between the value of TRI as a “message service” and the content of the “message”. TRI may provide information of value to investors, but performance changes may not be sufficient to merit a price response. The study also specifically addresses industry differences and clearly shows how average coefficients can be misleading relating to this one environmental performance indicator. The use of pooled industry coefficients may lead to inefficient resource allocation decisions within industries and ineffective policies at the regulatory level.

Journal

Sustainability Accounting, Management and Policy Journal – Emerald Publishing

Published: May 10, 2013

Keywords: Environmental performance; Toxics Release Inventory; Environmental management; Pollution

References

  • Competition has not lowered US industrial electricity prices
    Apt, J.
  • Predisclosure information, firm capitalization, and security price behavior around earnings announcements
    Atiase, R.
  • Unexpected earnings, firm size, and trading volume around quarterly earnings announcements
    Bamber, L.
  • Estimation and market valuation of environmental liabilities relating to superfund sites
    Barth, M.E.; McNichols, M.F.
  • The impact of climate change information: new evidence from the stock market
    Beatty, T.; Shimshack, J.P.
  • Market valuation and deregulation of electric utilties
    Blacconiere, W.G.; Johnson, M.F.; Johnson, M.S.
  • Robust corporate social responsibility investment screening
    Bossche, F.; Rogge, N.; Devooght, K.; Puyenbroeck, T.
  • A simple test for heteroscedasticity and random coefficient variation
    Breusch, T.; Pagan, A.
  • Using daily stock returns: the case of event studies
    Brown, S.J.; Warner, J.B.
  • Event‐study analysis
    Campbell, J.Y.; Lo, A.W.; MacKinlay, A.C.
  • How well do social ratings actually measure corporate social responsibility?
    Chatterji, A.K.; Levine, D.I.; Toffel, M.W.
  • The market valuation of environmental capital expenditures by Pulp & Paper companies
    Clarkson, P.M.; Li, Y.; Richardson, G.D.
  • Does it really pay to be green? Determinants and consequences of proactive environmental strategies
    Clarkson, P.M.; Li, Y.; Richardson, G.D.; Vasvari, F.P.
  • An analysis of intertemporal and cross‐sectional determinants of earning response coefficients
    Collins, D.W.; Kothari, S.P.
  • Diagnostics for heteroscedasticity in regression
    Cook, R.D.; Weisberg, S.
  • Investors' assessment of implicit environmental liabilities: an empirical investigation
    Cormier, D.; Magnan, M.
  • Environmental disclosures and share prices – a discussion about efforts to study this relationship
    Deegan, C.
  • Measuring corporate environmental performance: the trade‐offs of sustainability ratings
    Delmas, M.; Blass, V.D.
  • Information disclosure policies: evidence from the electricity industry
    Delmas, M.; Montes‐Sancho, M.; Shimshack, J.
  • Deregulation and environmental differentiation in the electric utility industry
    Delmas, M.; Russo, M.; Montes, M.
  • Measuring Corporate Environmental Performance
    Epstein, M.J.
  • Evidence on the pernicious effect of financial report environmental disclosure
    Freedman, M.; Patten, D.M.
  • Market reactions to the first‐time issuance of corporate sustainability reports: evidence that quality matters
    Guidry, R.P.; Patten, D.M.
  • Pollution as news: media and stock market reactions to the toxics release inventory data
    Hamilton, J.T.
  • Does it pay to be green? An empirical examination of the relationship between emission reduction and firm performance
    Hart, S.L.; Ahuja, A.
  • The value of relevance of environmental performance
    Hassel, L.; Nilsson, H.; Nyquist, S.
  • The Analytics of Uncertainty and Information
    Hirshleifer, J.; Riley, J.G.
  • The value relevance of nonfinancial measures of air pollution in the electric utility industry
    Hughes, K.E.
  • Trustees announce further governance enhancements
    IASB
  • Measuring corporate environmental performance
    Ilinitch, A.Y.; Soderstrom, N.S.; Thomas, T.E.
  • The power of information: the example of the US toxics release inventory
    Jobe, M.M.
  • Wholesale electricity market developments in the United States
    Joskow, P.L.
  • Corporate boards and outside stakeholders as determinants of environmental litigation
    Kassinis, G.; Vafeas, N.
  • Toxics release information: a policy tool for environmental protection
    Khanna, M.; Quimo, W.R.; Bojilova, D.
  • Exploring the locus of profitable pollution reduction
    King, A.A.; Lenox, M.J.
  • The impact of environmental management on firm performance
    Klassen, R.D.; McLaughlin, C.P.
  • Information as regulation: the effect of community right to know laws on toxic emissions
    Konar, S.; Cohen, M.
  • Does the market value environmental performance?
    Konar, S.; Cohen, M.
  • Econometrics of event studies
    Kothari, S.P.; Warner, J.B.
  • Can capital markets create incentives for pollution control?
    Lanoie, P.; Laplante, B.; Roy, M.
  • The prospects for industry self‐regulation of environmental externalities
    Lenox, M.J.
  • Stock price reactions to the wall street journal's securities recommendations
    Liu, P.; Smith, S.D.; Syed, A.A.
  • Event studies in economics and finance
    MacKinlay, A.C.
  • Electric utility deregulation: stranded costs vs stranded benefits
    Nunez, K.
  • Chemical security 101
    Orum, P.; Rushing, R.
  • Estimating standard errors in finance panel data sets: comparing approaches
    Peterson, M.A.
  • Toward a new conception of the environment‐competitiveness relationship
    Porter, M.E.; van der Linde, C.
  • Voluntary disclosure choice and information transfer
    Pownall, G.; Waymire, G.
  • Market failure and the environmental policies of firms: economic rationales for ‘beyond compliance’ behavior
    Reinhardt, F.L.
  • Pollution abatement expenditures and plant‐level productivity: a production function approach
    Shadbegian, R.J.; Gray, W.B.
  • Environmental risk management and the cost of capital
    Sharfman, M.P.; Fernando, C.S.
  • The association between interim information and security returns surrounding earnings announcements
    Shores, D.
  • Perceived auditor quality and the earnings response coefficient
    Teoh, S.H.; Wong, T.J.
  • EPA's toxic release inventory: stimulus and response
    Terry, J.D.; Yandle, B.
  • external stakeholders' perspectives on sustainability reporting
    Tilt, C.A.
  • Improving environmental performance assessment: a comparative analysis of weighting methods used to evaluate chemical release inventories
    Toffel, M.W.; Marshall, J.D.
  • A heteroskedasticity‐consistent covariance matrix estimator and a direct test for heteroskedasticity
    White, H.
  • Econometric Analysis of Cross Section and Panel Data
    Wooldridge, J.M.
  • Cluster‐sample methods in applied econometrics
    Wooldridge, J.M.