The article presents a reply to the comments made on a study about the observed association between the pollution control records of companies from the pulp and paper industry and their financial indicators in stock investment decisions. The author first dealt with the fundamental misinterpretation of the purpose of his study. Then, he made some general remarks about the extreme view of research. And finally, he made comments on some of the issues raised with respect to the validity of his study and the relationships among variables said to be implied.

The objective of this study is to provide some empirical evidence relevant to the social performance disclosure question. To provide this evidence, the investigation concentrated on ascertaining the validity of a widely stated view of some investors that a moderate to strong association exists between the investment value of a company's common shares and its social performance. This was achieved by testing for associations between a number of economic and financial indicators of investment value (profitability, size, total and systematic risk, price/earning ratio) and corporate performance on one key social issue (pollution control) in a sample of companies drawn from a pollution prone industry. Some statistically significant associations were found to exist although there was a reduction in the level of these associations over time. While generalization of these results will require further research, the findings reported are consistent with stated investors' perceptions.

Reviews the book "Canadian Corporate Social Performance," by Leonard J. Brooks.

Reviews the book "Improving Capital Budgeting: A Decision Support System Approach," by Lawrence A. Gordon and George E. Pinches.

Over the last ten years, large corporations, have significantly increased their voluntary disclosures of socially-oriented information in annual reports. External organizations such as the Council on Economic Priorities (CEP) also have been active in producing information bearing on firms' social performances--particularly with respect to pollution control. This study investigates whether security price movements are associated with the release of externally produced information about companies' performances in the pollution-control area--information which has attributes of consistency and comparability not typically found in voluntarily reported, socially-oriented data. Specifically, the study investigates security price movements associated with the release of eight major studies conducted by the CEP of firms' environmental performances in four industries. The observed price movements are consistent with changes in investors' perceptions of the probability distributions of future cash flows of the sample firms at the times of release of the CEP studies. The reported results also are consistent with investors using the information released by the CEP to discriminate between companies with different pollution-control performance records.