Thesis (MBA)--Stellenbosch University, 2015. / ENGLISH ABSTRACT: In the recent past, there has been increasing awareness of, and concern for, the impact that many
companies are having on the natural and social environment. This has seen the emergence of a
triple bottom line approach to business, with environmental and social metrics being used in
addition to financial metrics when evaluating company performance. Despite the growing level of
investment in corporate sustainability, it is not clear whether these investments are viewed
positively by the market, and to what extent it creates shareholder value.
To shed light on the relationship between environmental performance and financial performance,
this research assignment used the event study methodology to investigate whether there is
statistically significant stock market reactions to announcements relating to the environmental
performance of companies listed on the Johannesburg Stock Exchange.
A total of 260 news announcements related to environmental performance were collected from a
variety of news sources. The 260 news announcements represented 67 different companies
across 11 different industry sectors. News announcements were collected from several prominent
business news sources including the Business Day, Financial Mail and the Johannesburg Stock
Exchange News Service.
Abnormal share returns were estimated for a three day event window around the announcement
date by using the market model approach. Results were aggregated based on four different
categories of environmental performance, including corporate environmental initiatives,
environmental awards and certificates, negative environmental publicity and, environmental
reporting, permits and licences.
Consistent with related research in developed countries, this study found that the market rewards
certain categories of positive environmental performance but penalises certain categories of
negative environmental performance more severely. The results show that there is a significant
positive market reaction to announcements of corporate environmental initiatives on the trading
day following the announcement. This result indicates a positive relationship between corporate
environmental initiatives and financial performance, as measured by market value.
In terms of negative environmental performance, it was found that the market responds negatively
to the broad category of negative environmental publicity. In particular, negative announcements
from civil society and environmental groups seem to result in more significant market reactions
than negative announcements from local or national government.
In contrast to some studies done in developed countries, no statistically significant relationship was
found between announcements of environmental awards and certificates and the market value of
companies. Neither was there a statistically significant relationship between environmental
reporting, permits and licences and the market value of companies. These results therefore indicate that the market is selective in its response to announcements of environmental
performance.
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:sun/oai:scholar.sun.ac.za:10019.1/97358 |
| Date | 04 1900 |
| Creators | Schoeman, Pieter Stephanus Johannes Albertus |
| Contributors | Volschenk, Jako, Stellenbosch University. Faculty of Economic and Management Sciences. Graduate School of Business. |
| Publisher | Stellenbosch : Stellenbosch University |
| Source Sets | South African National ETD Portal |
| Language | en_ZA |
| Detected Language | English |
| Type | Thesis |
| Format | x, 80 pages |
| Rights | Stellenbosch University |
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