Time Horizons of Environmental Versus Non-Environmental Costs: Evidence from US Tort Lawsuits
MetadataShow full item record
One explanation for a positive correlation between environmental and financial performance at the firm level is a bias in firms’ investment evaluation processes caused by systematic differences between environmental and other investment opportunities. One of these systematic differences, often hypothesized but still unverified, is that environmental costs occur farther in the future than other costs. We empirically test this hypothesis, and find statistically significant support for it. In our data set the mean time lag for environmental costs was more than ten years, compared with five years for the control set costs. Such a difference could induce managers to accept too much environmental liability if they evaluate investments using discounted cash flow methods with a discount rate based on the firm-wide cost of capital.
The article of record as published may be found at http://dx.doi.org/10.1002/bse.494
Showing items related by title, author, creator and subject.
Kraverath, Scott C. (Monterey, California. Naval Postgraduate School, 1994-12);Although environmental concerns are nothing new, only recently have environmental issues been considered as having national security implications. Along with increased environmental awareness, the end of the Cold War has ...
McConnell, Joseph J. (Monterey, California. Naval Postgraduate School, 1999);This report concerns the evolution of Facilitated Environmental Partnering; of which the framework was developed in 1993 by the Naval Facilities Engineering Command, Southern Division (SOUTHDIV) in Charleston South Carolina, ...
Hill, Ronald E. (Monterey, California. Naval Postgraduate School, 2000-06);As a result of the legislation enacted over the past 20 years, American Government and industry are currently spending about $115 billion a year to meet environmental goals. This amount is expected to increase to $160 ...