An Empirical Analysis on the Relationship between Environmental Labeling and Firm Value

Abstract

Previous studies concerning environmental labels investigate consumers’ preference or consumption behavior toward labeled products. On the other hand, there have not been enough studies on environmental labels from the viewpoint of firm value. Therefore, our study examines whether Tobin’s q of a firm that attaches environmental labels to its products is higher than that of a firm that does not attach environmental labels. Although there are many types of environmental labels, we focus on those that feature third-party certification. Our sample includes listed Japanese manufacturing firms. To address endogeneity issues, we use the instrumental variable method in our estimation process. The results suggest that a firm that attaches environmental labels to its products has higher Tobin’s q than a firm that does not attach environmental labels.