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Firm value and government commitment to combating climate change

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  • Berkman, Henk
  • Jona, Jonathan
  • Soderstrom, Naomi

Abstract

•We examine the impact of government commitment to combating climate change on firm value.•The Ceres/CookESG climate risk measure based on 10-K disclosures is a useful measure of firm-specific climate risk.•We use this climate risk measure to form “climate risk hedge portfolios”.•There is a significant -0.5 percent abnormal return for our US hedge portfolio around signing of the Paris agreement.•For US firms, there is a significant 1 percent abnormal return around the election of President Trump.•There is a further positive abnormal return of around 4 percent in the six months following President Trump’s inauguration.•Non-US polluters were disadvantaged by the actual policies of the Trump government.•Californian state-level regulation acted as an effective substitute for federal level regulations.

Suggested Citation

  • Berkman, Henk & Jona, Jonathan & Soderstrom, Naomi, 2019. "Firm value and government commitment to combating climate change," Pacific-Basin Finance Journal, Elsevier, vol. 53(C), pages 297-307.
    • Handle: RePEc:eee:pacfin:v:53:y:2019:i:c:p:297-307
    DOI: 10.1016/j.pacfin.2018.11.003
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    1. Guastella, Gianni & Mazzarano, Matteo & Pareglio, Stefano & Xepapadeas, Anastasios, 2022. "Climate reputation risk and abnormal returns in the stock markets: A focus on large emitters," International Review of Financial Analysis, Elsevier, vol. 84(C).
    2. Aman, Hiroyuki & Beekes, Wendy & Berkman, Henk & Bohmann, Marc & Bradbury, Michael & Chapple, Larelle & Chang, Millicent & Clout, Victoria & Faff, Robert & Han, Jianlei & Hillier, David & Hodgson, All, 2019. "Responsible science: Celebrating the 50-year legacy of Ball and Brown (1968) using a registration-based framework," Pacific-Basin Finance Journal, Elsevier, vol. 56(C), pages 129-150.
    3. Khalfaoui, Rabeh & Mefteh-Wali, Salma & Viviani, Jean-Laurent & Ben Jabeur, Sami & Abedin, Mohammad Zoynul & Lucey, Brian M., 2022. "How do climate risk and clean energy spillovers, and uncertainty affect U.S. stock markets?," Technological Forecasting and Social Change, Elsevier, vol. 185(C).
    4. Teodora Cristina Barbu & Cosmin-Octavian Cepoi & Crina Raluca Petrescu & Mariana Vuta, 2022. "The Assessment of Climate Risk Impact on the Economy: A Panel Data Approach," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 24(61), pages 597-597, August.
    5. Robert W. Faff, 2019. "Adopting a Structured Abstract Design to More Effectively Catch Reader Attention: An Application of the Pitching Research® Framework," Capital Markets Review, Malaysian Finance Association, vol. 27(2), pages 1-13.
    6. Robert Faff & Tim Kastelle & Micheal Axelsen & Mark Brosnan & Rebecca Michalak & Kathleen Walsh, 2021. "Pitching research for engagement and impact: a simple tool and illustrative examples," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(2), pages 3329-3383, June.

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