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Good news for environmental self-regulation? Finding the right link

Yanbing Wang, Michael S. Delgado, Neha Khanna and Vicki L. Bogan

Journal of Environmental Economics and Management, 2019, vol. 94, issue C, 217-235

Abstract: We investigate the stock market response to firm disclosure of positive environmental information and the link from that information to environmental outcomes. We classify environmental media releases by informational content and value relevance, and assess the abnormal stock returns of each type of event. While announcements of future environmental activities lead to the largest favorable stock market reactions, there is no guaranteed link from this type of information to environmental outcomes. Further analysis of the abnormal returns shows that the magnitude of the stock market reaction depends on firm financial characteristics across all event types rather than on firm environmental performance. Our results indicate that the ability for voluntary environmental information disclosure to induce environmental self-regulation is limited to the extent that firms are able to follow through with their announcements of planned environmental activities.

Keywords: Voluntary environmental disclosure; Environmental responsibility; Event study; Information as regulation (search for similar items in EconPapers)
JEL-codes: Q50 Q58 G32 (search for similar items in EconPapers)
Date: 2019
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Journal of Environmental Economics and Management is currently edited by M.A. Cole, A. Lange, D.J. Phaneuf, D. Popp, M.J. Roberts, M.D. Smith, C. Timmins, Q. Weninger and A.J. Yates

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