Violations hit European firmsJune 2008
European companies lose market value when they are associated with environmental violations – but US businesses tend to escape unscathed.
Research by Sweden’s Umea School of Business into 142 incidents involving companies allegedly in violation of international norms on environmental issues found statistically significant reductions in the stock market value of European companies shortly after they were linked to incidents.
However, the same did not apply in the US, where the findings suggest environmental violations are of relatively little concern to shareholders and other interested parties.
The incidents examined took place between 2003 and 2006 and were compiled by GES Investment Services, the Scandinavian research company. They involved 74 businesses, of which 42 were in the US. When share prices fell after an incident, they rarely showed signs of a rapid recovery, and certainly not within 20 days, the longest period monitored by researchers.
A second phase of the study, which is being paid for by Mistra, the Sweden-based Foundation for Strategic Environmental Research, will consider the impact of human rights incidents on company valuations.
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