Carbon emission trading scheme, investors’ attention, and earnings response coefficients
Jun Hu,
Siyu Zhang,
Liang Wang and
Daifei Yao
Journal of International Financial Markets, Institutions and Money, 2024, vol. 97, issue C
Abstract:
This study explores how the introduction of the carbon emissions trading scheme (ETS) affects investors’ reactions to corporate earnings surprises. We propose two non-exclusive explanations, namely, the preference-based view and the uncertainty-based view, and suggest that the implementation of ETS may influence the magnitude of investor responses to corporate unexpected earnings. Consistent with the preference-based view, by utilizing China’s introduction of ETS as a quasi-natural experiment, we observe a reduction in the earnings response coefficients (ERCs) following the implementation of ETS. We validate this result by showing that the introduction of ETS prompts investors to focus on corporate carbon risk. Cross-sectional tests find that the effect of ETS on ERCs is more pronounced in firms with higher corporate carbon risk exposure, in firms whose investors exhibit greater environmental awareness, in better-developed carbon pilot markets, and in firms with greater exposure to international capital markets, while this impact is mitigated by firms’ non-financial performance. These findings highlight the importance of environmental regulation and market liberalization in influencing investors’ resource allocation.
Keywords: Carbon emission trading scheme; Investor earning response; Carbon risk (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:
Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1042443124001513
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:intfin:v:97:y:2024:i:c:s1042443124001513
DOI: 10.1016/j.intfin.2024.102085
Access Statistics for this article
Journal of International Financial Markets, Institutions and Money is currently edited by I. Mathur and C. J. Neely
More articles in Journal of International Financial Markets, Institutions and Money from Elsevier
Bibliographic data for series maintained by Catherine Liu ().