Advances in Environmental Accounting & Management by Belal Ataur; Cooper Stuart; de Souza Freire Fátima

Advances in Environmental Accounting & Management by Belal Ataur; Cooper Stuart; de Souza Freire Fátima

Author:Belal, Ataur; Cooper, Stuart; de Souza Freire, Fátima
Language: eng
Format: epub
Publisher: Emerald Publishing Limited
Published: 2017-03-20T16:00:00+00:00

Does the ICO2 Serve as a Reliable Indicator of Companies’ FP?

We also discuss the empirical evidence on the association between CS and FP. According to Lima, Souza, Faria, and Rodrigues (2014), the financial market has created sustainability indices that seek to highlight companies’ sustainable management practices, particularly with regard to the environment. Among the existing indices, the ICO2 serves to measure the carbon efficiency of companies with stocks listed on the BM&FBovespa (Lima et al., 2014). Thus, many studies have used the ICO2 index as a proxy for the sustainable behavior of companies. Each study used its own FP proxies; some referred to other broad indices of the BM&FBovespa, while others used economic/financial variables to compare companies’ performance.

According to Pinheiro (2013), the use of the ICO2 has a negative impact on the third-party capital cost of companies. It is possible to infer that voluntarily publicizing information of environmental nature benefits companies that subscribe to this initiative. The author conducted a panel data estimation for 20 companies that participated in the ICO2. dos Reis, Matias, and França (2013) and Souza, Suzart, Ribeiro, and Corrar (2012), on the other view, obtained a positive relationship between the participation in the ICO2 and the value of the stocks.

Souza et al. (2012) verified that the ICO2 presented statistically positive variation in portfolio returns compared to the IBOV and IBrX50 indices. As to the existence of a relationship between the variables in the long run, it was not possible to statistically detect an equilibrium. dos Reis et al. (2013) conducted a correlation analysis using panel data of nine companies subscribing to the ICO2 to investigate whether there is a relationship between sustainable companies and FP. The results confirmed a positive relationship; however, it only holds in the short run.

Almeida, Gomes, Filho, and Ribeiro (2013) and da Silva Barbosa, Altoé, da Silva, and de Almeida (2014) applied the event study methodology and found a neutral (or not significant) effect on the FP of companies that subscribed to the ICO2. Almeida et al. (2013) analyzed if the ICO2 index influenced the prices of stocks that composed this index’s portfolio between 2008 and 2013 and found no significant difference in stock value. Their conclusion was based on the absence of significant returns of stocks comprising the index, thus proving that it is not a significant indicator for stock valuation.

da Silva Barbosa et al. (2014) also investigated whether there was a relationship between subscribing to the ICO2 and stock returns. The studied sample comprised 28 companies that formed the first ICO2 portfolio. The findings suggested that joining the ICO2 did not impact stock returns. It is worth mentioning that, among the investigated companies, the stock returns of Vale, a Brazilian mining company, remained stable before and after joining the index. On the other hand, those of Cyrela and MRV presented more variability.

Nevertheless, since the ICO2 is a recent index, only a few studies have investigated its effect on FP. It is worth mentioning that the theoretical contribution of empirical studies


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