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The value relevance of environmental performance
Åbo Akademi University.
Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE).
Swedish University of Agricultural Sciences.
2005 (English)In: The European Accounting Review, ISSN 0963-8180, E-ISSN 1468-4497, Vol. 14, no 1, 41-61 p.Article in journal (Refereed) Published
Abstract [en]

This paper provides insight into how environmental information is reflected in the market value of listed Swedish companies. Using the residual income valuation model, we express market value of equity as a function of book value of equity, accounting earnings, and environmental performance, where the last variable is used as a proxy for other value-relevant information. Our research is motivated by the recommendation of the Swedish Society of Financial Analysts regarding environmental reporting. This recommendation assumes that environmental information has value relevance, since it is likely to affect the expected future earnings of listed companies. We contribute empirical findings to current debate on the relationship between environmental performance and shareholder value. The cost-concerned school argues that environmental investments represent only increased costs, resulting in decreased earnings and lower market values. The value creation school regards environmental efforts as a way to increase competitive advantage and improve financial returns to the investors. The current research finds support for the cost-concerned school, because the results indicate that environmental performance has a negative influence on the market value of firms.

Place, publisher, year, edition, pages
Taylor & Francis Group, 2005. Vol. 14, no 1, 41-61 p.
National Category
Business Administration
URN: urn:nbn:se:umu:diva-3712DOI: 10.1080/0963818042000279722OAI: diva2:142537


Available from: 2004-03-03 Created: 2004-03-03 Last updated: 2014-10-20
In thesis
1. Essays on the value relevance of financial statment information
Open this publication in new window or tab >>Essays on the value relevance of financial statment information
2003 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

This thesis consists of an introductory chapter and four self-contained essays on the value relevance of financial statement information.

Essay 1: The purpose of this essay is to examine relevance of environmental information from an investor’s perspective. The study proposes that the market value of companies will reflect both financial and environmental performance. The theoretical foundation of the study is the accounting based valuation theory outlined by Ohlson (1995). This study provides new insights into how environmental performance is reflected in the market value of Swedish companies listed on the Swedish Stock market.

Essay 2: In financial accounting research, much effort has been devoted to study the relation between accounting earnings and stock prices. The primary purpose of the second essay is to investigate the effect of alternative return-earnings model specifications to the estimated returns-earnings relation, that is, the earnings response coefficients. The returns-earnings models investigated include the traditional earnings levels and changes, and models including analysts’ earnings forecasts based on Ohlson’s (1995) extended residual income model.

Essay 3: Fundamental analysis research that focuses on the use of accounting information to estimate equity value, has surfaced as a central theme in market based accounting research of the 1990s (Lee, 1999). The purpose of third essay is to compare two different approaches to valuation based on the theory presented in Ohlson (1995) in terms of explanatory and predictive power of the value estimates. Both approaches are implemented with and without the use of analysts forecasts.

Essay 4: In this essay data from the Swedish stock market is used to investigate the profitability of two different types of investment strategies based on fundamental-to-value ratios and past insider trading activity. The purpose of the research is to explore four related research questions: (i) Do accounting based trading strategies generate abnormal returns on the Swedish stock market?; (ii) Do trading strategies based on insider trading behaviour generate abnormal returns on the Swedish stock market?; (iii) Do insiders who buy stocks tend to favour value stocks and do insiders who sell stocks tend to dispose growth stocks?; and (iv) Are insiders able to discriminate between temporary high/low fundamentals and temporary low/high prices when buying/selling value stocks and growth stocks?

25 p.
Studier i företagsekonomi. Serie B, ISSN 0346-8291 ; 50
Business studies, Equity valuation, stock market, financial accounting, insider trading, Företagsekonomi
National Category
Business Administration
Research subject
Business Studies
urn:nbn:se:umu:diva-195 (URN)91-7305-518-2 (ISBN)
Public defence
2003-10-31, hsal 205, Samhällsvetarhuset, 90187, Umeå, 13:15
Available from: 2004-03-03 Created: 2004-03-03 Last updated: 2016-02-25Bibliographically approved

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Hassel, LarsNilsson, HenrikNyqkvist, Siv
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