The environmental decisions of corporations can have a huge impact on both the environment and a company’s value. This paper finds that the stock market reacts negatively to news about the environmental behavior of firms. A 2009 Newsweek study on the “greenness” of companies is used in the study. The event study methodology is used with stock prices to measure the stock market reaction by creating Cumulative Abnormal Returns. The average abnormal returns of all the companies are significantly negative suggesting that investors react adversely to “green” news.
Anderson-Weir, Charles H.
"How Does the Stock Market React to Corporate Environmental News?,"
Undergraduate Economic Review:
1, Article 9.
Available at: http://digitalcommons.iwu.edu/uer/vol6/iss1/9