Environmental Reporting, Financial Fundamentals and Company Valuation: Insights from the Industrial Sector
The paper investigates the effect of environmental policies on the market valuation of companies within the European Union's Industrial sector, along with traditional financial indicators. Taking into account the Corporate Sustainability Reporting Directive imposed by the European Union auth...
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| Main Authors: | , , , , , |
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| Format: | Article |
| Language: | English |
| Published: |
Editura ASE
2025-08-01
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| Series: | Amfiteatru Economic |
| Subjects: | |
| Online Access: | https://www.amfiteatrueconomic.ro/temp/Article_3441.pdf |
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| Summary: | The paper investigates the effect of environmental policies on the market valuation of
companies within the European Union's Industrial sector, along with traditional financial
indicators. Taking into account the Corporate Sustainability Reporting Directive imposed by
the European Union authorities for the most prominent companies, we used a comprehensive
data set of 494 publicly listed companies over the period 2020-2023 to assess the predictive
impact of environmental policy adoption (EPO), environmental policy quality scores
(EPOS), and financial variables (FV) on the price-to-book (PB) ratio of listed companies. We
use a Random Forest regression model to identify and rank the importance of a
comprehensive set of variables, underlining the idea of investor attention and priorities. The
main findings point to an increase in investor interest in the effectiveness of environmental
policies rather than their simple presence, emphasising the strategic importance of integrating
measurable environmental outcomes into company valuation frameworks. However,
traditional financial variables consistently outperform environmental indicators in explaining
market valuation. |
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| ISSN: | 1582-9146 2247-9104 |