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How Does the Implementation of the New Environmental Protection Law Affect the Stock Price of Heavily Polluting Enterprises? Evidence from China’s Capital Market

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  • Genwen Zhang
  • Chaoyang Fang
  • Wangfei Zhang
  • Qiong Wang
  • Donglan Hu

Abstract

This paper puts forward “attention hypothesis” and “information revelation hypothesis” in terms of the strong market response to the implementation of the updated China Environmental Protection Law (hereinafter referred to as “the new EPL”) in 2015, which verifies the effectiveness of China’s capital market in identifying dynamic changes of company fundamental information by selecting listed heavily polluting enterprises in China as research samples. The “attention hypothesis” interprets the slump in stock due to investors’ attention attracted by media coverage about implementation of “the new EPL”, while the “information revelation hypothesis” focuses on the investors’ information acquisition during the hiatus from promulgation to implementation of “the new EPL”. This paper is of great significance to help understand the behavioral characteristics, decision-making process and influencing mechanism of investors.

Suggested Citation

  • Genwen Zhang & Chaoyang Fang & Wangfei Zhang & Qiong Wang & Donglan Hu, 2019. "How Does the Implementation of the New Environmental Protection Law Affect the Stock Price of Heavily Polluting Enterprises? Evidence from China’s Capital Market," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 55(15), pages 3513-3538, December.
    • Handle: RePEc:mes:emfitr:v:55:y:2019:i:15:p:3513-3538
    DOI: 10.1080/1540496X.2019.1648250
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    Cited by:

    1. Guo, Shu & Zhang, ZhongXiang, 2023. "Green credit policy and total factor productivity: Evidence from Chinese listed companies," Energy Economics, Elsevier, vol. 128(C).
    2. Yixuan Chen & Shanyue Jin, 2023. "Corporate Social Responsibility and Green Technology Innovation: The Moderating Role of Stakeholders," Sustainability, MDPI, vol. 15(10), pages 1-20, May.
    3. Yao, Shouyu & Pan, Yuying & Sensoy, Ahmet & Uddin, Gazi Salah & Cheng, Feiyang, 2021. "Green credit policy and firm performance: What we learn from China," Energy Economics, Elsevier, vol. 101(C).
    4. Wang, Gaoshan & Yu, Guangjin & Shen, Xiaohong, 2021. "The effect of online environmental news on green industry stocks: The mediating role of investor sentiment," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 573(C).
    5. Jiamin Liu & Xiaoyu Ma & Bin Zhao & Qi Cui & Sisi Zhang & Jiaoning Zhang, 2023. "Mandatory Environmental Regulation, Enterprise Labor Demand and Green Innovation Transformation: A Quasi-Experiment from China’s New Environmental Protection Law," Sustainability, MDPI, vol. 15(14), pages 1-31, July.
    6. Tumala, Mohammed M. & Salisu, Afees & Nmadu, Yaaba B., 2023. "Climate change and fossil fuel prices: A GARCH-MIDAS analysis," Energy Economics, Elsevier, vol. 124(C).
    7. Zhou, Di & Qiu, Yuan & Wang, Mingzhe, 2021. "Does environmental regulation promote enterprise profitability? Evidence from the implementation of China's newly revised Environmental Protection Law," Economic Modelling, Elsevier, vol. 102(C).

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