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The Effects of Environmental Regulation on the Singapore Stock Market

Author

Listed:
  • Huy Pham

    (School of Business and Management, RMIT University, 702 Nguyen Van Linh Blvd, District 7, Ho Chi Minh City 700000, Vietnam)

  • Van Nguyen

    (Faculty of Finance and Banking, Ton Duc Thang University, Ho Chi Minh City 700000, Vietnam)

  • Vikash Ramiah

    (Faculty of Business, University of Wollongong, Dubai 00000, UAE)

  • Priyantha Mudalige

    (School of Economics, Finance and Property, Bentley Campus, Curtin University, Bentley 6102, Western Australia, Australia)

  • Imad Moosa

    (School of Economics, Finance and Marketing, RMIT University, Melbourne 3000, Victoria, Australia)

Abstract

This study examines the impact of environmental regulation on the Singapore stock market using the event study methodology. Several asset pricing models are used to estimate sectoral abnormal returns. Additionally, we estimate the change in systematic risk after the introduction of the carbon tax and related regulation. We conduct various robustness tests, including the Corrado non-parametric ranking test, the Chesney non-parametric conditional distribution approach, a representation of market integration, and Fama–French five-factor model. We find evidence showing that the environmental regulations tend to achieve their desired effects in Singapore in which several big polluters (including industrial metals and mining, forestry and papers, and electrical equipment and services) were negatively affected by the announcements of environmental regulations and carbon tax. In addition, our results indicate that the electricity sector, one of the biggest polluters, was negatively affected by the announcement of environmental regulations and carbon tax. We also find that environmental regulations seem to boost the performance of environmentally-friendly sectors whereby we find the alternative energy industry (focusing on new renewable energy technologies) experienced a sizeable positive reaction following the announcements of these regulations.

Suggested Citation

  • Huy Pham & Van Nguyen & Vikash Ramiah & Priyantha Mudalige & Imad Moosa, 2019. "The Effects of Environmental Regulation on the Singapore Stock Market," JRFM, MDPI, vol. 12(4), pages 1-19, November.
    • Handle: RePEc:gam:jjrfmx:v:12:y:2019:i:4:p:175-:d:290387
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