Company green score and stock price

In this paper, by using the Newsweek Magazine green scores of the 500 largest U.S. companies in 2010, we study the effect of a company's green score on its stock price. We find that a company's green score and its stock price are significantly negatively related. Because the cost of keeping green may adversely affect a company's profitability, investors appear to be willing to pay a lower price for green company stocks compared with nongreen company stocks. Since the goal of a company's financial management is to maximize its stock price, our results in this study indicate that there is no market incentive for U.S. companies to go green. The policy implication of our finding is that federal, state, and local tax incentives may be needed to encourage U.S. companies to go green and to keep green.