Earticle

초록

영어

This paper investigates how corporate Environmental, Social, and Governance (ESG) actions affect firm value. By employing an event study around two close 5-to-4 Supreme Court rulings and using portfolio-based approaches, we document that sustainability is capitalized into the value of firms. When the Court awards broader regulatory authority to the EPA, polluting firms with the largest discrepancies vis-a-vis the new rules heralded by the Court exhibit the largest price responses. On the other hand, when the Court narrows the regulatory limit of an existing environmental law, polluting firms lose value. The announcement returns are more sensitive to the Court rulings for firms in regions with a higher level of trust. More generally, a portfolio of firms with cleaner production practices earns alphas (4.43% annually for value-weighted returns) compared to firms with toxic production practices that have similar exposure to well-known factor models. Firms with greener production practices show positive earnings surprises, higher revenue and profitability, and more capital inflow from institutional investors with longer horizons. The abnormal returns are more pronounced among firms in regions with a high level of trust. In sum, we show that firms gain value when they go green.

목차

Abstract
1 Introduction
2 Data and Summary Statistics
2.1 Pollution Abatement
2.2 Trust
2.3 Lobbying Expenditure
2.4 Financial Statements
2.5 Construction of Variables and Summary Statistics
3 Event Study Analysis
3.1 Legislative Events
3.2 Methodology
3.3 Results
3.4 Social Trust
3.5 Lobbying
4 Cross-section of Stock Returns
4.1 Portfolio Sort
4.2 Fama-MacBeth Regressions
5 Channels
5.1 Future Firm Performance
5.2 Social Trust
6 Conclusion
References
Appendix A: Variable construction

키워드

저자

• Taehyun Kim [ University of Notre Dame ]
• Yongjun Kim [ University of Seoul ]

참고문헌

발행기관

간행물

표지보기 관심저널 등록

• 간행물명

  한국재무학회 학술대회

• 간기

  부정기

• 수록기간

  2006~2024

• 십진분류

  KDC 325 DDC 330