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The valuation relevance of environmental performance revisited: The moderating role of environmental provisions
Jönköping University, Jönköping International Business School, JIBS, Center for Family Enterprise and Ownership (CeFEO). Essex Business School, University of Essex, United Kingdom.
2018 (English)In: The British Accounting Review, ISSN 0890-8389, E-ISSN 1095-8347, Vol. 50, no 1, p. 32-47Article in journal (Refereed) Published
Abstract [en]

This study attempts to broaden our understanding of the value relevance of environmental performance by providing empirical evidence on the moderating role of financial environmental reporting. Previous studies find that firms' environmental performance can be both positively and negatively associated with market value. Such contradictory findings can be attributed to the fact that environmental performance is associated with future economic benefits and costs. This study suggests that firms with recognized environmental provisions on their balance sheets enable investors to disentangle these opposite effects either by signaling strong future financial performance or by enhancing the reliability of environmental performance information. Regardless of the mechanism by which this moderation effect is invoked, it is hypothesized that capital market participants place a positive and significantly higher value on the environmental performance ratings of firms with recognized environmental provisions than on the ratings of firms without environmental provisions. Utilizing a sample of 692 firm-year observations of French listed firms and employing a linear price-level model that associates the market value of a firm's equity with its environmental performance, I provide empirical evidence to corroborate this thesis. In addition to contributing to the academic debate on the market valuation implications of environmental performance, this study intends to provide useful insights from a country that can be considered a pioneer of environmental reporting legislation; hence, it provides valuable lessons for other jurisdictions that are in the process of developing their sustainability reporting regulations. Finally, the findings of this study support the calls for more integrated reporting showing that the interaction of financial and non-financial information has market valuation implications.

Place, publisher, year, edition, pages
Elsevier, 2018. Vol. 50, no 1, p. 32-47
Keywords [en]
Environmental performance; Environmental provisions; Value relevance; France; Mandatory disclosures
National Category
Business Administration
Identifiers
URN: urn:nbn:se:hj:diva-31674DOI: 10.1016/j.bar.2017.09.002ISI: 000429517200003Scopus ID: 2-s2.0-85033585152OAI: oai:DiVA.org:hj-31674DiVA, id: diva2:958305
Available from: 2016-09-06 Created: 2016-09-06 Last updated: 2018-09-05Bibliographically approved
In thesis
1. Essays on the market valuation implications of mandatory corporate reporting
Open this publication in new window or tab >>Essays on the market valuation implications of mandatory corporate reporting
2016 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

The purpose of this dissertation is to enrich understanding on the market valuation implications of mandatory financial and non-financial reporting beyond and in relation to traditional accounting information. It is comprised of four individual essays each of which examines a different, and to some extent internationally unique, jurisdiction that can best serve the particular purpose of the essay as well as the overarching purpose of the dissertation.

The starting point of this empirical inquiry is the value relevance of purchased goodwill under IFRS and the moderating role that different levels of compliance with IFRS mandatory disclosures play on its market valuation. Similar to the first essay, the second essay focuses on traditional accounting information (specifically book value of equity and earnings) and examines potential differences on its market valuation before and after the mandatory introduction of an integrated reporting approach. The third essay focuses on mandatory carbon emissions reporting and compares its valuation relevance when such reporting is mandated by regulation vis-à-vis when it is voluntary. Finally, the fourth essay examines the market valuation interplay between mandatory financial and non-financial disclosures.

This dissertation intends to be of particular relevance first; to the accounting academic community which acknowledges that mandatory disclosures are not well understood and it calls for further research on how users of annual reports view mandatory disclosures and second; to accounting regulators. Empirical research on the value relevance of corporate reporting can provide useful insights into questions of interest to regulators because its research questions are often motivated by broader questions raised by these non-academic constituents. The dissertation in hand has similar motivations.

Place, publisher, year, edition, pages
Jönköping: Jönköping University, Jönköping International Business School, 2016. p. 48
Series
JIBS Dissertation Series, ISSN 1403-0470 ; 109
National Category
Business Administration
Identifiers
urn:nbn:se:hj:diva-31675 (URN)978-91-86345-68-6 (ISBN)
Public defence
2016-09-14, B1014, Jönköping International Business School, Jönköping, 13:00 (English)
Opponent
Supervisors
Available from: 2016-09-06 Created: 2016-09-06 Last updated: 2018-09-05Bibliographically approved

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