The wealth effects of the announcement of the Australian carbon pricing scheme

Jianlei Han, Martina K. Linnenluecke, Pan, Zheyao (Terry) and Tom Smith

Pacific-Basin Finance Journal, 2019, vol. 53, issue C, 399-409

Abstract: In this study, we examine the wealth effects associated with the announcement of the Australian Carbon Pricing Scheme (the “carbon tax”), made by the then Prime Minster Julia Gillard on 24 February 2011. Building on studies that use the event study method originally developed by Fama et al. (1969) and Ball and Brown (1968), we propose a novel approach to analyzing announcements with unresolved uncertainty. With this approach, we separate out the news effect and the value effect associated with the announcement of the Australian Carbon Pricing Scheme. Our findings show that the average news effect associated with the announcement is 1.11% (A$254 million dollars), indicating that the market was favorably disposed towards the news that the government was taking action on climate change. The average value effect was −4.46% (−A$1.12 billion dollars), indicating that the scheme destroyed significant value for existing firms. The announcement of the Australian Carbon Pricing Scheme was more value-destructive for carbon-intensive firms (−6.97%) than for the other firms (−3.67%). The method presented in this study can be applied to any policy announcements with unresolved uncertainty

Keywords: Australian Carbon Pricing Scheme; Carbon tax; Event study; Value effect; News effect; Probability of legislature passage (search for similar items in EconPapers)
JEL-codes: G14 G18 Q54 Q58 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0927538X1830386X
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:53:y:2019:i:c:p:399-409

DOI: 10.1016/j.pacfin.2018.12.006

Access Statistics for this article

Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee

More articles in Pacific-Basin Finance Journal from Elsevier
Bibliographic data for series maintained by Catherine Liu ().