Stock Market Reactions to Pollution Information Disclosure: New Evidence from the Pollution Blacklist Program in China

Yalin Zhou, Jing Cao and Yujia Feng
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Yalin Zhou: China Academy of Transportation Sciences, Beijing 100029, China
Jing Cao: School of Economics and Management, Tsinghua University, Beijing 100084, China
Yujia Feng: School of Economics and Management, Tsinghua University, Beijing 100084, China

Sustainability, 2021, vol. 13, issue 4, 1-13

Abstract: Public disclosure of environmental information has been widely used as an important instrument in green finance. In this paper, we examine a blacklist program of polluting firms and conduct an event study to evaluate how the stock market responds to the pollution news. Our results show that the pollution disclosure indeed had a significant negative effect on the stock market performance of listed companies on the blacklists, but only when the overall market was under downward shocks, suggesting that the shareholders were more sensitive to the pollution news in bad times. When the stock market performed well or was relatively stable, the blacklist effects were not evident. Our heterogeneity analyses further revealed that the magnitude of the cumulative abnormal returns depended on the firm size. That is, the larger the firms are, the less they suffer from the pollution news release. Our findings show that pollution disclosure does penalize the polluting firms through stock market response mechanisms.

Keywords: Pollution Blacklist Program; market value; environmental risk; information disclosure; investors (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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