The equity market response to climate change litigation

Zhenshu Wu and Rui Zhong

Finance Research Letters, 2024, vol. 67, issue PA

Abstract: We document a significant decline in defendants' stock prices after the filing of litigation cases on climate change issues in the US. Economically, we document a 0.5% decline on the filing day and a 2.7% cumulative abnormal decline in the eight days following the filing. Cross-sectional analysis shows that the negative response is more pronounced in firms with greater external financial constraints, higher cash flow volatility, and lower environmental, social, and governance ratings. The difference-in-differences analysis shows a decline in total and responsible institutional ownership and an increase in corporate reputation risk after a climate change litigation is filed.

Keywords: Climate change litigation; Equity returns; Responsible institutional ownership; Corporate reputation risk (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:67:y:2024:i:pa:s1544612324009000

DOI: 10.1016/j.frl.2024.105870

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