Business and Management INK

Environmental Disclosure: Newsweek’s Green Rankings

August 23, 2012 6462

What does it mean to be green? Ahead of this October’s fourth annual corporate environmental scores, Thomas P. Lyon of the University of Michigan and Jay P. Shimshack of Tulane University investigate in “Environmental Disclosure: Evidence From Newsweek’s Green Companies Rankings,” published on August 13, 2012 in Business & Society. The abstract:

Corporate-level environmental information disclosure is increasingly common. This article studies the impact of a prominent media-generated sustainability ratings program, Newsweek’s 2009 ranking of the 500 largest U.S. firms. Using an event study methodology, the authors find the rankings had a significant impact on shareholder value. Firms in the top 100 experienced abnormal returns after the information release that were 0.6%–1.0% higher than returns of firms in the bottom 400. The form of the information released had significant effects as well. Nuanced environmental score variables had no independent impact on market outcomes; only the final ranking mattered. This article also explores possible channels through which the rankings may have had their impact. The authors find suggestive evidence that private and public politics mechanisms were the most important.

Click here to read the article in Business & Society and here to learn more about the journal.

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