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Climate reputation risk and abnormal returns in the stock markets: A focus on large emitters

Gianni Guastella, Matteo Mazzarano, Stefano Pareglio and Anastasios Xepapadeas ()

International Review of Financial Analysis, 2022, vol. 84, issue C

Abstract: Reputation risk is among the possible climate transition risks companies face, especially in emission-intensive industries. Failing to meet stakeholders' expectations about the contribution to climate goals might influence investors' strategies and produce financial damages. We look at the climate-related social media talk in a sample of highly polluting companies. For these companies, reputation risk materialises if their climate talk is perceived as not coherent with their action-taking. We then assess the impact of climate talk on short-term stock market performance, as measured by abnormal returns, and find a positive association between climate-related social media talks and abnormal returns. The strength of this association lowers during peak days of social media attention on climate-related topics.

Keywords: Transition risk; Reputation risk; Events analysis; Text analysis; Efficient markets (search for similar items in EconPapers)
JEL-codes: G32 G41 Q54 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1016/j.irfa.2022.102365

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