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The effect of environmental and social performance on the stock performance of european corporations

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An Erratum to this article was published on 02 October 2007


This paper examines the effect of sustainability performance of European corporations on their stock performance, measured as the average monthly stock return from 1996 to 2001. The econometric analysis is based on common empirical asset pricing models, particularly on the multifactor model according to Fama and French (1993, Journal of Financial Economics, 33:3–56). The consideration of sustainability performance is two-fold: The average sustainability performance of the industry in which a corporation operates and the relative sustainability performance of a corporation within a given industry. The main result is that the average environmental performance of the industry has a significantly positive influence on the stock performance. In contrast, the average social performance of the industry has a significantly negative influence. The variables of the relative environmental or social performance of a corporation within a given industry have no significant effect on the stock performance. As a by-product, the econometric analysis implies that some results of Fama and French (1993, 1996, The Journal of Finance, LI (1):55–84) regarding the risk factors of the multifactor model need not hold true for different observation periods, for different stock markets, and for the use of single stocks (instead of portfolios).

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Correspondence to Andreas Ziegler.

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We would like to thank José Manuel Chamorro, Shreekant Gupta, Shulamit Kahn, and other participants of the 12th Annual Conference 2003 of the European Association of Environmental and Resource Economists (EAERE) in Bilbao, Spain, and of the 18th Annual Congress 2003 of the European Economic Association (EEA) in Stockholm, Sweden, for stimulating discussions and annotations during the early stages of the research, Jan-Hendrik Hirsch, Ilja Karabanow, and Thomas Rohrmann for their sedulous work in data preparation, as well as Wolfram Schlenker and two anonymous referees for their helpful comments

An erratum to this article can be found at

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Ziegler, A., Schröder, M. & Rennings, K. The effect of environmental and social performance on the stock performance of european corporations. Environ Resource Econ 37, 661–680 (2007).

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