 Is evil rewarded with evil? The market penalty effect of corporate environmentally irresponsible eventsYouliang Jin, Chen Cheng and Huixiang Zeng Business Strategy and the Environment, 2020, vol. 29, issue 3, 846-871 Abstract: The negative response of the capital market to environmentally irresponsible events is an important governance mechanism that motivates enterprises to assume environmental responsibility. Based on the theory of effective markets and organizational legitimacy, this paper takes corporate environmentally irresponsible events in Chinese environmentally sensitive industries during the period of 2014–2018 as a research sample, and our work uses the event study methodology to explore the penalty effect of the capital market from a mathematical empirical and case empirical dimension. Furthermore, this research discusses the spillover effect of corporate environmentally irresponsible events in the capital markets. The empirical results show that once an irresponsible event is exposed, it causes a significant negative cumulative abnormal return (CAR) in the short term, and the difference between the industry and the ownership type leads to a significant difference in the duration and impact of the penalty effect. More interestingly, the capital market's penalty for corporate environmentally irresponsible events may have a notable industry spillover effect, but there are differences between the penalty effect and the spillover effect in different markets. This paper confirms that the penalty mechanism of the capital market related to an environmentally irresponsible event can effectively restrain the behaviour of the company involved and the industry to which it belongs, and it may also provide a new way for the government to build an eco‐environmental protection system of multisubject “co‐governance” and bring the punitive “forced” mechanism of the capital market to bear on corporate environmentally responsible behaviour. Date: 2020 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bla:bstrat:v:29:y:2020:i:3:p:846-871 Ordering information: This journal article can be ordered from Access Statistics for this article Business Strategy and the Environment is currently edited by Richard Welford More articles in Business Strategy and the Environment from Wiley Blackwell |
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