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Does Community and Environmental Responsibility Affect Firm Risk? Evidence from UK Panel Data 1994-2006

Toms, S., Anderson, K. and Salama, A. (2009) Does Community and Environmental Responsibility Affect Firm Risk? Evidence from UK Panel Data 1994-2006. Working Paper. Department of Management Studies, University of York

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Abstract

The question of how an individual firm’s environmental performance impacts its firm risk has not been examined in any empirical UK research. Does a company that strives to attain good environmental performance decreases its market risk or is environmental performance just a disadvantageous cost that increases such risk levels for these firms? Answers to this question have important implications for the management of companies and the investment decisions of individuals and institutions. The purpose of this paper is to examine the relationship between corporate environmental performance and firm risk in the British context. Using the largest dataset so far assembled, with Community and Environmental Responsibility (CER) rankings for all rated UK companies between 1994 and 2006, we show that a company’s environmental performance is inversely related to its systematic financial risk. However, an increase of 1.0 in the CER score is associated with only a 0.02 reduction in firm’s risk and cost of capital.

Item Type: Monograph (Working Paper)
Institution: The University of York
Academic Units: The University of York > The York Management School
Depositing User: Repository Administrator York
Date Deposited: 24 Sep 2010 11:45
Last Modified: 16 Oct 2014 14:52
Status: Published
Publisher: Department of Management Studies, University of York
Refereed: No
URI: http://eprints.whiterose.ac.uk/id/eprint/11230

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