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Investors' Reaction to Environmental Performance: A Global Perspective of the Newsweek's 'Green Rankings'

Author

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  • Murguia, Juan Manuel
  • Lence, Sergio H.

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 to than heavy sector stocks. We find that investors in US-traded stocks are more interested on past environmental performance than on managerial quality, while the opposite is true for investors in non-US-traded stocks. Results are robust to alternative model specifications

Suggested Citation

  • Murguia, Juan Manuel & Lence, Sergio H., 2014. "Investors' Reaction to Environmental Performance: A Global Perspective of the Newsweek's 'Green Rankings'," Staff General Research Papers Archive 37468, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genres:37468
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    Cited by:

    1. Andrew S. Manikas & James R. Kroes, 2018. "The relationship between lean manufacturing, environmental damage, and firm performance," Letters in Spatial and Resource Sciences, Springer, vol. 11(2), pages 141-155, July.
    2. Hanae Tamechika & Shin’ya Okuda, 2017. "Stock price responses to the eco-points programme for electrical household appliances: evidence from Japan," Applied Economics, Taylor & Francis Journals, vol. 49(58), pages 5856-5864, December.
    3. Sarah Tiba & Frank J. van Rijnsoever & Marko P. Hekkert, 2019. "Firms with benefits: A systematic review of responsible entrepreneurship and corporate social responsibility literature," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 26(2), pages 265-284, March.

    More about this item

    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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