The Impact of Forest Certification on Firm Financial Performance in Canada and the U.S.

The purpose of this article is to examine empirically the impact of environmental certification on firm financial performance (FP). The main question is whether there is a ‘‘green premium’’ for certified firms, and, if so, for what kind of certification. We analyze the short-run and the long-run stock price performance using an event-study methodology on a sample of Canadian and U.S. firms. The results of short-run event abnormal returns indicate that forest certification does not have any significant impact on firm FP regardless of the certification system carried out by firms. Unlike the short-run results, the long-run post-event abnormal returns suggest that forest certification has, on average, a negative impact on firm FP. However, the impact of forest certification on firm FP depends on who grants the certification, since only industry-led certification (Sustainable Forestry Initiative, Canadian Standards Association and ISO14001are penalized by financial markets, whereas non-governmental organizations–led Forest Stewardship Council certification is not.