Environmental policies and firm value

Many organizations are currently becoming more environmentally friendly. Eco-efficiency maximizes a business operation’s effectiveness while reducing impact on the environment; with the necessary skills, organizations can create more value while using less input. Prior empirical studies have suggested that firms engaging in eco-efficient activities are better valued than those without such activities. Therefore, this will enhance business efficiency and excellence. This study investigates the link between eco-efficiency, as environmental policy, and firm value in the United Kingdom (UK) for the period 1999 to 2008. We generate new insights into environmental–financial performance by using different definitions of the eco-efficiency term. Our results support from the UK context that eco-efficient firms have higher market values compared to those lacking environmental strategies. Hence, we recommend firms to involve in environmental polices since the adoption of these polices will positively impact firm value.

Article first published online: 27 APR 2011