Does the market reward firms for being more green or less brown?

Yifan Liu () and Leyuan You ()
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Yifan Liu: Texas State University
Leyuan You: Texas State University

Journal of Economics and Finance, 2023, vol. 47, issue 3, No 2, 564-585

Abstract: Abstract This paper examines whether the market rewards firms for superior green performance or for being less brown. It finds that the market punishes brown firms and rewards them for improving environmental performance but does not pay a premium for green firms and does not punish green firms for deteriorating environmental performance. Brown firms have greater extreme losses due to elevated environmental risks. Increasing environmental related investments is associated with reduced risk, increased firm value for brown firms but decreased firm value for green firms. Overall, results in this paper indicate that market reward firms for reducing exposure to environmental risks but not for being green.

Keywords: Green; Environmental; Excess return; Tail risks; Green costs; Institutional holding (search for similar items in EconPapers)
JEL-codes: G12 G15 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s12197-023-09633-y

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