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Investors’ reaction to environmental performance: A global perspective of the Newsweek’s “Green Rankingsâ€

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  • Murguia, Juan Manuel
  • Lence, Sergio H.

Abstract

�We use event study analysis to determine whether the release of Newsweek’s “Global 100�Ranking†is relevant for the market. We look at one- and two-day event windows to check two�possible reactions of the market: changes in the value of a portfolio consisting of one unit of the�stock of each listed company, and changes in the relative price of the stocks. The results show�that the market reacted to the “Global 100 Ranking†by changing the relative price of the stocks�but not the value of the portfolio. Specifically, getting one position closer to the top of�Newsweek’s “Global 100 Green Rankings†increases the value of an average firm in the list by�one billion dollar. There is also some evidence of a stronger reaction of non-U.S. traded stocks�compared to U.S. traded ones. Non-heavy sectors display a more robust reaction to than heavy�sectors. Results are very robust to different model specifications.���

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File URL: http://www.econ.iastate.edu/sites/default/files/publications/papers/p15664-2012-11-20.pdf
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File URL: http://www.econ.iastate.edu/sites/default/files/publications/papers/p15663-2012-11-20.pdf
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Bibliographic Info

Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 35664.

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Date of creation: 20 Nov 2012
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Handle: RePEc:isu:genres:35664

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Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
Phone: +1 515.294.6741
Fax: +1 515.294.0221
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Web page: http://www.econ.iastate.edu
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  1. Marie-Aude Laguna & Gunther Capelle-Blancard, 2010. "How Does the Stock Market Respond to Chemical Disasters?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00637961, HAL.
  2. Markus Kitzmueller & Jay Shimshack, 2012. "Economic Perspectives on Corporate Social Responsibility," Journal of Economic Literature, American Economic Association, vol. 50(1), pages 51-84, March.
  3. Jegadeesh, Narasimhan & Titman, Sheridan, 1993. " Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency," Journal of Finance, American Finance Association, American Finance Association, vol. 48(1), pages 65-91, March.
  4. Khanna, Madhu & Quimio, Wilma Rose H. & Bojilova, Dora, 1998. "Toxics Release Information: A Policy Tool for Environmental Protection," Journal of Environmental Economics and Management, Elsevier, vol. 36(3), pages 243-266, November.
  5. Takeda, Fumiko & Tomozawa, Takanori, 2008. "A change in market responses to the environmental management ranking in Japan," Ecological Economics, Elsevier, Elsevier, vol. 67(3), pages 465-472, October.
  6. Stephen Fowler & C. Hope, 2007. "A Critical Review of Sustainable Business Indices and their Impact," Journal of Business Ethics, Springer, Springer, vol. 76(3), pages 243-252, December.
  7. A. Craig MacKinlay, 1997. "Event Studies in Economics and Finance," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 13-39, March.
  8. Yamaguchi, Keiko, 2008. "Reexamination of stock price reaction to environmental performance: A GARCH application," Ecological Economics, Elsevier, Elsevier, vol. 68(1-2), pages 345-352, December.
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