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Does the market reward firms for being more green or less brown?

Author

Listed:
  • Yifan Liu

    (Texas State University)

  • Leyuan You

    (Texas State University)

Abstract

This paper examines whether the market rewards firms for superior green performance or for being less brown. It finds that the market punishes brown firms and rewards them for improving environmental performance but does not pay a premium for green firms and does not punish green firms for deteriorating environmental performance. Brown firms have greater extreme losses due to elevated environmental risks. Increasing environmental related investments is associated with reduced risk, increased firm value for brown firms but decreased firm value for green firms. Overall, results in this paper indicate that market reward firms for reducing exposure to environmental risks but not for being green.

Suggested Citation

  • Yifan Liu & Leyuan You, 2023. "Does the market reward firms for being more green or less brown?," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 47(3), pages 564-585, September.
    • Handle: RePEc:spr:jecfin:v:47:y:2023:i:3:d:10.1007_s12197-023-09633-y
    DOI: 10.1007/s12197-023-09633-y
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    References listed on IDEAS

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    More about this item

    Keywords

    Green; Environmental; Excess return; Tail risks; Green costs; Institutional holding;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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