Do Investors Value Environmental Corporate Policies? Evidence from the Australian Market
In this paper, we explore the relationship between a firm’s environmental policies and their risk-adjusted stock returns, using a sample of stock exchange-listed Australian firms over the period of 2010–2018. We observed a positive and statistically significant relationship suggesting that a firm’s...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
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MDPI AG
2021-03-01
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| Series: | Journal of Risk and Financial Management |
| Subjects: | |
| Online Access: | https://www.mdpi.com/1911-8074/14/3/124 |
| Summary: | In this paper, we explore the relationship between a firm’s environmental policies and their risk-adjusted stock returns, using a sample of stock exchange-listed Australian firms over the period of 2010–2018. We observed a positive and statistically significant relationship suggesting that a firm’s environmental policies partially explain their stock performance. Moreover, we found that investors in the Australian market significantly value a companies’ efforts to reduce emissions, and that this primarily drives the investors’ observed reaction to a firm’s social corporate policies. Next, we formed portfolios and observed that portfolios formed on high environmental, social, and governance (ESG) Environmental Pillar scores consistently outperformed those formed on low-ESG Environmental Pillar scores. Overall, our results lend support to the notion that investors in the Australian market value information about a firm’s social policies. |
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| ISSN: | 1911-8066 1911-8074 |