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News about biodiversity risk and excess value of diversification

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  • Amanjot Singh

Abstract

This study investigates the excess value implications of news about biodiversity risk for investors of diversified firms using a sample of 1019 US firms from 2001 to 2023. In a given year, more positive news about biodiversity risk increases the value of diversified firms relative to a benchmark portfolio of single‐segment firms, especially for large‐diversified firms. This diversification premium effect, that is, the excess value of diversified firms, in response to positive news about biodiversity risk, is non‐linear, robust to several alternative specifications, and exists regardless of internal capital market efficiency, number of business segments, excess net income, and the climate change exposure of diversified firms. Our study highlights the potent role of diversified firms in exploiting biodiversity protection‐related investment opportunities, as investors attach a relative premium to such firms.

Suggested Citation

  • Amanjot Singh, 2025. "News about biodiversity risk and excess value of diversification," International Review of Finance, International Review of Finance Ltd., vol. 25(4), December.
    • Handle: RePEc:bla:irvfin:v:25:y:2025:i:4:n:e70042
    DOI: 10.1111/irfi.70042
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