Why Does the Reduction of Greenhouse Gas Emissions Enhance Firm Value? The Case of Japanese Manufacturing Firms

Abstract

This paper examines the influence of firms' reductions of greenhouse gas (GHG) emissions on firm value, measured by Tobin's q. If the stockholders/investors regard the reduction of GHG emissions as a form of intangible value, the reduction of GHG emissions will enhance firm value. To prove this relation more precisely, this paper analyzes not only the effect of the reduction of GHG emissions on firm value but also that of the market discipline imposed by the stockholders/investors in terms of the reduction of GHG emissions. Using data on 641 Japanese manufacturing firms in the period 2006-2008, the random effect instrumental variable estimate supports the view that firms with strong market discipline imposed by stockholders/investors are more likely to reduce GHG emissions and, consequently, firms that reduce more GHG emissions are more likely to enhance firm value.

Environmental policy and sustainable development: An empirical study on carbon reduction among Chinese enterprises

“…The empirical results (H1) confirmed that a reduction in CO 2 emissions did not negatively affect the sustainable development of firms; these results were consistent with the findings reported in previous studies (Brzobohatý & Janský, 2010;Nishitani & Kokubu, 2012;Sariannidis et al, 2013). The empirical results (H1) confirmed that a reduction in CO 2 emissions did not negatively affect the sustainable development of firms; these results were consistent with the findings reported in previous studies (Brzobohatý & Janský, 2010;Nishitani & Kokubu, 2012;Sariannidis et al, 2013).…”

“…The carbon reduction variables employed by the present study were different from those employed by previous research, such as data obtained from computational formulae (see, e.g., Nishitani & Kokubu, 2012) and data pertaining to macroeconomics released by the various countries (Melike & Tahsin, 2016).…”

“…Relevant empirical studies have been conducted in the manufacturing industry (Li & Zhang, 2010;Nishitani & Kokubu, 2012). We identified the data on carbon reduction from a large pool of samples derived from the manufacturing industry.…”

The impacts of carbon (CO2) emissions and environmental research and development (R&D) investment on firm performance

“…The objective of this study is to examine the impacts of carbon emissions and environmental R&D investment on the financial performance of the Japanese manufacturing firms. Japan has been one of the largest manufacturing producers, while at the same time, being one of world's largest carbon emitters (Nishitani and Kokubu, 2012). The mandatory GHGs accounting and reporting system of the Ministry of the Environment was introduced in 2006.…”

Carbon information disclosure of enterprises and their value creation through market liquidity and cost of equity capital

“…Many environmental studies have analyzed the benefits carbon information disclosure brought to enterprise value creation (Chapple, Clarkson & Gold, 2013;Griffin, Lont & Sun, 2011;Nishitani & Kokubu, 2012;Saka & Oshika, 2014). However, these researches might have some limitations.…”