Environmental backsliders, repeat offenders and capital markets: Evidence from India

Shreekant Gupta, Bishwanath Goldar, Shubham Dang and Omer F. Baris

Economics Letters, 2025, vol. 256, issue C

Abstract: Regulatory rollbacks raise a critical question for emerging markets: do investors discipline firms that relapse on environmental performance? We combine the two public rounds of India’s Green Rating Project (GRP) for 17 mills in the paper-and-pulp sector with a variance-robust event study. We uncover a double-digit market penalty for environmental backsliding (decline in green rating), proving that investors care about a firm’s trajectory, not just its current score. Plants that improve or maintain ratings experience no significant abnormal return. Periodic, third-party performance evaluation and rating programs can leverage capital-market discipline to compensate for persistently weak regulation in emerging markets or for regulatory rollback as observed in the U.S., Brazil and Europe.

Keywords: Environmental performance; Event study; Green rating; Repeat offenders (search for similar items in EconPapers)
JEL-codes: G14 G32 Q53 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:256:y:2025:i:c:s0165176525004409

DOI: 10.1016/j.econlet.2025.112603

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