Unveiling the Relationship between Voluntary Environmental Standards and Stock Market Performance: Empirical Insights from Textile Manufacturing Firms in Pakistan

Abstract

The primary objective of this study is to examine the impact of voluntary environmental standards, specifically EMS and eco-labels, on firms' stock market performance. To achieve this aim, fixed-effect regressions were applied using panel data from 96 textile firms listed on the Pakistan Stock Exchange between 2009 and 2022. Data were meticulously sourced from the State Bank of Pakistan (2022), annual reports of manufacturing firms, and their official websites. The findings of this study indicate a positive correlation between the adoption of EMS & eco-labels, and stock market performance among manufacturing firms in Pakistan. Similarly, eco-label also helps to promote sustainable business. Similarly, EMS is also important for EPS. It is also observed that firms having eco-label has significant impact on EPS. Eco-label helps to increase sale, profitability and stock market by ensuring the sustainable production, because, customer satisfaction and loyalty increases. By adopting VES, an industry can achieved increase in profit, reduce cost, improve environmental standards and, also, increase consumer confidence. The outcomes of the study signify the importance of managerial commitment to the adoption and implementation of voluntary environmental standards within these firms.