The effect of corporate environmental initiatives on firm value: evidence from Fortune 500 firms

When do firms derive value from investing in environmental initiatives (CEIs)? We examine stock market responses to the announcements of 183 CEIs by 71 Fortune 500 firms during the period 2002 to 2008. We find that the stock market reacts positively to such announcements but does not react differently to CEIs concerning a firm?s inputs, throughputs, and outputs. We also find that there is an inverted U-shaped relationship between the timing of a CEI and the abnormal stock market return following its announcement. Overall, this study shows that timing is a relevant explanatory factor for the value firms derive from investing in environmental action

European energy industry shocks, corporate control and firm's value

The deregulation process in the EU electricity sector triggered strategic decisions that led to industry restructuring. This paper presents preliminary evidence of the impact of this process on investors, using event studies and estimation techniques such as least squares and GARCH. Our findings suggest three stylized facts: 1) regulatory reform in Europe was certainly accompanied by a takeover wave, as predicted by Mitchell and Mulherin (1996); 2) mergers and acquisitions had a positive impact on the stock price of target firms, and a much lower and sometimes even a negative impact for the bidding firms; 3) the effect of takeover announcements on the returns of competitors of the merging firms depends on the degree of market power. In countries with high market power (like Spain) competitors significantly increase share returns upon takeover announcements, whereas in countries with lower market power (like England and Wales) returns do not change significantly

Stock market reaction to ESG news in Norway

News on environmental, social, and governance (ESG) subjects are becoming increasingly prevalent in the largest economic newspapers in Norway. These news are followed by analysts, the public, and other stakeholders. This thesis investigates the extent of the stock market reaction following news related to ESG subjects. We assemble a dataset of news articles by performing a structured search in atekst's newspaper database Retriever. The articles concerns companies in the energy sector noted on the Oslo Stock Exchange, sampled in the period 2010-2021. We employ a natural language processing model to categorize the articles as either positive or negative. We conduct an event study around the announcement of the articles collected. We find that the market participants are responsive to the news releases. Our results suggest a positive market reaction to corporate ESG news with a positive sentiment and a negative reaction towards negative ESG news. We argue that shareholders assign utility and value to ESG initiatives in energy companies and punish unsustainable behavior

Stock Market Reaction to ESG News in Norway

News on environmental, social, and governance (ESG) subjects are becoming increasingly prevalent in the largest economic newspapers in Norway. These news are followed by analysts, the public, and other stakeholders. This thesis investigates the extent of the stock market reaction following news related to ESG subjects. We assemble a dataset of news articles by performing a structured search in atekst's newspaper database Retriever. The articles concerns companies in the energy sector noted on the Oslo Stock Exchange, sampled in the period 2010-2021. We employ a natural language processing model to categorize the articles as either positive or negative. We conduct an event study around the announcement of the articles collected. We find that the market participants are responsive to the news releases. Our results suggest a positive market reaction to corporate ESG news with a positive sentiment and a negative reaction towards negative ESG news. We argue that shareholders assign utility and value to ESG initiatives in energy companies and punish unsustainable behaviour

Is greenwashing relevant information for investors? An event study of corporate greenwashing and stock market reactions

The understandings and frequencies of climate change adversities have increased dramatically in the last decades. As a result, firms are under pressure from stakeholders to improve their environmental performance. However, some firms are opting to take shortcuts in the form of corporate greenwashing. This thesis investigates whether the exposure of corporate greenwashing leads to abnormal stock returns, and studies relationships between the abnormal returns and firm characteristics. We also discuss the concept of greenwashing, specifically its definitions, history, drivers, and future. Using an event study methodology, we define the events to be the day of publication for an article in a major news outlet that exposes firms for greenwashing. From a sample of 44 greenwashing firms from 2015-2022, we find that the exposure of greenwashing is associated with significant negative abnormal returns for some event windows. In particular, the event window [0,2] shows abnormal returns of -1.376% and is significant at the 1% level. The evidence shows that investors react negatively to the exposure of greenwashing. We argue that the reactions might come from the notion that environmental performance is regarded as valuable, or that investors have a disregard for cheaters. We also apply OLS regressions on the cumulative abnormal returns (CAR) and firm characteristics, to find that CAR is significantly related to firm size, industry, and environmental score. The results for the cross-sectional regressions are subject to model specifications and varies across event windows. Keywords Greenwashing,nhhma

Essays in environmental economics: innovation and economic performance of firms, and distributional questions

This thesis consists of two parts within the field of environmental economics. The first part contributes to the literature on the relationship between firms’ environmental and economic performance. The second part investigates distributional questions within environmental economics. The first part of this thesis consists of three co-authored chapters. Chapter 1 provides a systematic and detailed literature review on the relationship between firms’ environmental and economic performance. It is an introductory and scene-setting chapter to the subsequent two chapters. Chapter 2 examines how diversifying production towards low carbon goods and services impacts the financial performance and market valuation of firms. Using new data on firms’ revenues that are generated from the production of green goods and services, we are able to measure shifts from non-green to green activities at the firm level. The paper provides novel insight into the relationship between such green revenues and a comprehensive set of accounting- and market based economic performance measures. Chapter 3 uses event study methodology to assess the impact of the Paris Agreement on stock returns. We show that green firms, have experienced significant positive abnormal returns in the week following the agreement compared to the overall market. In addition, we show that emissions-intensity appears to be a less precise determinant for firms’ stock performance. The second part consists of two single-authored chapters. Chapter 4 examines distributional preferences for international climate finance. Understanding public preferences for climate policies is crucial to ensure and increase public support for such policies. Using a choice experiment on a representative sample of the UK population this chapter elicits preferences with respect to distributional dimensions of adaptation finance. The findings provide new insights into preferred payment mechanisms and support the adoption of egalitarian policy mandates among international climate adaptation funds. Chapter 5 contributes to the literature on distributional outcomes of natural resource wealth. We use panel regression techniques as well as the quasi-experimental synthetic control method at the country- and US state-level to estimate the effect of an oil price boom on income inequality. The paper does not find strong evidence for a significant relationship. It discusses challenges in empirically identifying effects on aggregate inequality metrics

Essays in corporate finance and ESG

The three essays collected in this PhD thesis are on topics of corporate finance and environmental, social, and governance (ESG). The first essay examines the effect of state ownership on the relationship between ESG and stock performance. Taking the COVID-19 market crash as an exogenous shock, this study suggests that the benefit of ESG activities on stock returns is driven by non-state-owned enterprises. The second essay investigates the intra-industry effects of environmental and social (ES) scandals in China. It demonstrates that, although rivals experience a significant decline in stock prices during scandal announcements, rivals’ strong ES performance can mitigate the negative influence through channels of risk. The third essay studies how carbon risk affects corporate cash holding policies and documents a significant increase in high-carbon emitters’ cash holdings when carbon risk increases in China

The impact of environmental performance on stock prices in the green and innovative context

.This study examines the impact of environmental performance on firms' stock prices, considering the moderating effect of the green and innovative environmental context by country. Renewable energy policies, green technologies, and foreign trade form this environmental context of interest for the reduction of carbon emissions. Using a sample of 2638 firm-year observations for the firms listed in the main stock index of 16 European countries over the period of 2005–2017, we find that environmental performance is value-relevant, except during the worst years of a crisis, when it is not significant. Two elements of the green technological framework, namely, renewable energy policies and the potential transmission effect of technology through foreign trade, are valued by investors as offsetting factors of the positive effect exerted by carbon performance on the firm's value. This is consistent with the slow and costly adoption of greener technologies. However, registered green patents appear to be a turning point, showing a significant positive effect on the relationship between firms' environmental performances and their market values. Again, the crisis period interferes with deepening the negative effect of renewable energy policies and cancelling out the effect of green patents and foreign trade. On one hand, our results highlight the market's role in making inefficiencies visible and showing the potential future losses of green and innovative policies; on the other hand, the hampering interference of crisis periods must be considered by policymakers.S

Supply chain security certification and operational performance:The role of upstream complexity

Supply chain security (SCS) incidents increasingly cause financial losses to manufacturing facilities and logistics service providers. Thus, supply chain security certification can have implications for production economics, particularly for importing firms who rely on a smooth logistics flow across country borders. However, it largely remains unknown regarding how such certification could influence a firm's operational performance. To this end, we empirically examine whether and how the adoption of Customs-Trade Partnership Against Terrorism (C-TPAT) certification, initiated by the U.S. Customs and Border Protection (CBP), could improve operational performance in adopter firms. This study draws upon signaling theory to empirically investigate the value of C-TPAT certification on U.S. publicly-traded importer firms' operational performance by analyzing the longitudinal data of properly-matched sample-control groups. The data come from multiple sources: public announcements of C-TPAT certification from the News Retrieval Service database, import data from lading records, and financial data from Standard & Poor's COMPUSTAT database. Employing a coarsened exact matching (CEM) method and a difference-in-difference (DID) analysis, we find that C-TPAT certified importers have better operational performance than that of non-certified importers. We also find that the level of upstream supply chain complexity (detail, dynamic, and spatial complexity) enhances the operational performance derived from C-TPAT certification. This study sheds light on the performance value of a management standard that is attributed to the non-process mechanism (not due to process improvements) enabled by the signaling effectiveness incorporating the upstream supply chain complexities. Our findings have important theoretical and practical implications for production economics and supply chain management studies

UNDERSTANDING THE PAYOFFS FROM SUSTAINABILITY

Ph.DDOCTOR OF PHILOSOPH