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Excess stock returns and corporate environmental performance in China

Author

Listed:
  • Dandan Ma

    (Chinese Academy of Sciences
    University of Chinese Academy of Sciences)

  • Pengxiang Zhai

    (Beihang University)

  • Dayong Zhang

    (Southwestern University of Finance and Economics)

  • Qiang Ji

    (Chinese Academy of Sciences
    University of Chinese Academy of Sciences)

Abstract

Using unbalanced panel data on 3326 Chinese listed companies from 2014 to 2021, this study investigates the impact of corporate environmental performance on China’s excess stock returns. The results show that stocks of companies with better environmental performance earn significantly higher excess returns, indicating the existence of green returns in the Chinese stock market. We further reveal that heightened climate-change concerns can boost the stock market’s green returns, while tightened climate policies decrease green returns by increasing long-term carbon risk. Our findings are robust to endogeneity problems and hold great implications for both investors and policymakers.

Suggested Citation

  • Dandan Ma & Pengxiang Zhai & Dayong Zhang & Qiang Ji, 2024. "Excess stock returns and corporate environmental performance in China," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 10(1), pages 1-30, December.
    • Handle: RePEc:spr:fininn:v:10:y:2024:i:1:d:10.1186_s40854-023-00569-0
    DOI: 10.1186/s40854-023-00569-0
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    3. Yin Li & Xu Wang & Qi Qin, 2025. "Comparative Analysis of Carbon Tax and Carbon Market Strategies for Facilitating Carbon Neutrality in China’s Coal-Fired Electricity Sector," Sustainability, MDPI, vol. 17(5), pages 1-25, February.
    4. Zhou, Qi & Ni, Jiajun & Yang, Cunyi, 2025. "Climate transition risk and industry returns: The impact of green innovation and carbon market uncertainty," Technological Forecasting and Social Change, Elsevier, vol. 214(C).

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