THE MARKET RISK OF CORPORATE ENVIRONMENTAL ILLEGITIMACY.

There is little agreement about the nature of the relationship between corporate environmental performance and financial performance, even though it has received considerable scrutiny. In this paper, we explore the relationship from a slightly different angle. In particular, we shift the focus from corporate environmental performance to corporate environmental legitimacy. By applying institutional theory, we argue that a firms' environmental legitimacy is related, not to financial performance, but to market risk. We also argue that managers can manipulate the relationship between corporate environmental legitimacy and market risk through impression management. Using data from the stock market, media accounts, and the press releases of 99 firms over 5 years, we found a negative relationship between corporate environmental legitimacy and unsystematic market risk, and corporate impression management moderated this relationship. The relationship between corporate environmental legitimacy and systematic risk, ...