The reflection of environmental investments on the market value of Romanian companies
21/2007 , p68..88
Author(s):
Carmen Giorgiana BONACI
Alin Ionel IENCIU
Keywords:
Environmental investments, equity, accounting earnings, function
Abstract:
The paper tries to provide insight into the way environmental information and especially environmental investments influence the market value of Romanian companies. In order to quantify this influence we expressed market value of equity as a function of book value equity, accounting earning and environmental performance, as main variables. This recommendation assumes that environmental information has value relevance since it is likely to affect the expected future earnings of companies. Currently we could consider two main categories of opinions regarding this matter: one arguing that environmental investments represent only increased costs, resulting in decreased earnings and lower market value, and the other saying that environmental efforts play a value creation function. The value relevance of environmental performance ratings for the market value of companies will be reflected by analyzing financial statements from some Romanian companies which apply environmental policies, this article having the role of grounding our framework. Our study finds support for the cost-concerned category, the main reason for this conclusion being the company’s attitude regarding environmental concerns in general.
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