IDEAS home Printed from https://ideas.repec.org/a/eee/jomega/v41y2013i2p195-206.html
   My bibliography  Save this article

Does the market value corporate response to climate change?

Author

Listed:
  • Hsu, Audrey Wen-hsin
  • Wang, Tawei

Abstract

Motivated by the controversial debate on mandatory reductions of greenhouse gases in the U.S., this study explores whether the market values corporate response to tackle carbon dioxide emissions. We measure corporate responses using the measure of media tone based on the positive and negative words in each news article. Our results show that the market reacts favorably to the negative media exposure of corporate response to climate change over the announcement period and the one-year period, which implies that the socially responsible action to tackle climate change is costly. We further find that the positive response is less pronounced for firms from polluting industries and firms with poor environmental performance.

Suggested Citation

  • Hsu, Audrey Wen-hsin & Wang, Tawei, 2013. "Does the market value corporate response to climate change?," Omega, Elsevier, vol. 41(2), pages 195-206.
  • Handle: RePEc:eee:jomega:v:41:y:2013:i:2:p:195-206
    DOI: 10.1016/j.omega.2011.07.009
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0305048312000229
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Paul C. Tetlock & Maytal Saar-Tsechansky & Sofus Macskassy, 2008. "More Than Words: Quantifying Language to Measure Firms' Fundamentals," Journal of Finance, American Finance Association, vol. 63(3), pages 1437-1467, June.
    2. Core, John E. & Guay, Wayne & Larcker, David F., 2008. "The power of the pen and executive compensation," Journal of Financial Economics, Elsevier, vol. 88(1), pages 1-25, April.
    3. Stephen Brammer & Chris Brooks & Stephen Pavelin, 2006. "Corporate Social Performance and Stock Returns: UK Evidence from Disaggregate Measures," Financial Management, Financial Management Association International, vol. 35(3), pages 97-116, September.
    4. Shameek Konar & Mark A. Cohen, 2001. "Does The Market Value Environmental Performance?," The Review of Economics and Statistics, MIT Press, vol. 83(2), pages 281-289, May.
    5. Freedman, Martin & Jaggi, Bikki, 1982. "Pollution disclosures, pollution performance and economic performance," Omega, Elsevier, vol. 10(2), pages 167-176.
    6. Amir, Eli & Lev, Baruch, 1996. "Value-relevance of nonfinancial information: The wireless communications industry," Journal of Accounting and Economics, Elsevier, vol. 22(1-3), pages 3-30, October.
    7. Karen Palmer & Wallace E. Oates & Paul R. Portney, 1995. "Tightening Environmental Standards: The Benefit-Cost or the No-Cost Paradigm?," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 119-132, Fall.
    8. Graham, John R. & Harvey, Campbell R. & Rajgopal, Shiva, 2005. "The economic implications of corporate financial reporting," Journal of Accounting and Economics, Elsevier, vol. 40(1-3), pages 3-73, December.
    9. Wendling, RM & Bezdek, RH, 1989. "Acid rain abatement legislation--Costs and benefits," Omega, Elsevier, vol. 17(3), pages 251-261.
    10. DeFond, Mark L. & Jiambalvo, James, 1994. "Debt covenant violation and manipulation of accruals," Journal of Accounting and Economics, Elsevier, vol. 17(1-2), pages 145-176, January.
    11. repec:bla:joares:v:37:y:1999:i:2:p:319-352 is not listed on IDEAS
    12. Forbes, William, 2006. "The boys in the bubble: Internet entrepreneurs and stock market value," Omega, Elsevier, vol. 34(5), pages 439-447, October.
    13. Paul C. Tetlock, 2007. "Giving Content to Investor Sentiment: The Role of Media in the Stock Market," Journal of Finance, American Finance Association, vol. 62(3), pages 1139-1168, June.
    14. Lowe, J & Lewis, D, 1979. "Economic approaches to environmental decision-making," Omega, Elsevier, vol. 7(5), pages 421-430.
    15. Adams, Greg & McQueen, Grant & Seawright, Kristie, 1999. "Revisiting the stock price impact of quality awards," Omega, Elsevier, vol. 27(6), pages 595-604, December.
    16. Glen Dowell & Stuart Hart & Bernard Yeung, 2000. "Do Corporate Global Environmental Standards Create or Destroy Market Value?," Management Science, INFORMS, vol. 46(8), pages 1059-1074, August.
    17. Common, MS, 1979. "External costs: Myth or rationale for state intervention?," Omega, Elsevier, vol. 7(5), pages 385-397.
    18. Stern, Joel M, 1974. "Earnings per share is a poor indicator of performance," Omega, Elsevier, vol. 2(1), pages 11-32, February.
    19. Parket, I. Robert & Eilbirt, Henry, 1975. "The practice of business social responsibility: the underlying factors," Business Horizons, Elsevier, vol. 18(4), pages 5-10, August.
    20. Cho, Charles H. & Patten, Dennis M., 2007. "The role of environmental disclosures as tools of legitimacy: A research note," Accounting, Organizations and Society, Elsevier, vol. 32(7-8), pages 639-647.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Wei, Yi-Ming & Mi, Zhi-Fu & Huang, Zhimin, 2015. "Climate policy modeling: An online SCI-E and SSCI based literature review," Omega, Elsevier, vol. 57(PA), pages 70-84.
    2. Hjort, Ingrid, 2016. "Potential Climate Risks in Financial Markets: A Literature Overview," Memorandum 01/2016, Oslo University, Department of Economics.
    3. Lee, Ki-Hoon & Min, Byung & Yook, Keun-Hyo, 2015. "The impacts of carbon (CO2) emissions and environmental research and development (R&D) investment on firm performance," International Journal of Production Economics, Elsevier, vol. 167(C), pages 1-11.
    4. David C Broadstock & Alan Collins & Lester C Hunt & Konstantinos Vergos, 2014. "Voluntary Disclosure, Greenhouse Gas Emissions and Business Performance: Assessing the First Decade of Reporting," Surrey Energy Economics Centre (SEEC), School of Economics Discussion Papers (SEEDS) 149, Surrey Energy Economics Centre (SEEC), School of Economics, University of Surrey.

    More about this item

    Keywords

    Environmental studies; Climate change; Tone;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jomega:v:41:y:2013:i:2:p:195-206. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/375/description#description .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.