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Investors’ Reaction to Environmental Performance: A Global Perspective of the Newsweek ’s “Green Rankings”

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  • Juan Murguia

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  • Sergio Lence

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 an equal-weight portfolio, 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 eleven million dollars. There is also some evidence of a stronger reaction of non-US-traded stocks compared to US-traded ones. Non-heavy sector stocks display a more robust reaction than heavy sector stocks. We find that investors in US-traded stocks are interested in past environmental performance and managerial quality, while the second is more relevant for investors in non-US-traded stocks. Results are robust to alternative model specifications. Copyright Springer Science+Business Media Dordrecht 2015

Suggested Citation

  • Juan Murguia & Sergio Lence, 2015. "Investors’ Reaction to Environmental Performance: A Global Perspective of the Newsweek ’s “Green Rankings”," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 60(4), pages 583-605, April.
  • Handle: RePEc:kap:enreec:v:60:y:2015:i:4:p:583-605
    DOI: 10.1007/s10640-014-9781-0
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    References listed on IDEAS

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    More about this item

    Keywords

    Environmental ranking; Event study; Newsweek magazine; M14; G02; G14; G24; Q51; Q56;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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