How bad is bad news?: Assessing the effects of environmental incidents on firm value
2009 (English)In: American Journal of Finance and Accounting, ISSN 1752-7767, Vol. 1, no 4, 376-392 p.Article in journal (Refereed) Published
Based on a formal model of how investments in corporate socialresponsibility act upon firm value through goodwill, we derive the hypothesisthat under uncertainty bad news are detrimental to goodwill, and subsequentlyhave a negative impact on value. We examine by event study methodologywhether bad news in the form of environmental (EV) incidents affect firmvalue negatively as measured by abnormal returns using a global data set. AnEV incident is a company incident allegedly in violation of international normson environmental issues. We analyse 142 EV incidents 2003–2006. The EVincidents are generally associated with loss of value, but which are notstatistically significant, except for incidents for firms in Europe. Furthermore,results indicate that firms with low goodwill capital (high EV risk rating) areassociated with relatively larger negative abnormal returns in case of an EV incident.
Place, publisher, year, edition, pages
Inderscience publishers , 2009. Vol. 1, no 4, 376-392 p.
abnormal returns, corporate social responsibility, event study, CSR investment, environmental incidents, firm value, uncertainty, bad news, goodwill
Research subject Business Studies
IdentifiersURN: urn:nbn:se:umu:diva-31804DOI: 10.1504/AJFA.2009.031774OAI: oai:DiVA.org:umu-31804DiVA: diva2:295211