Pollution and corporate valuation: evidence from China

Chunyang Wang, Haiyang Zhang, Liping Lu, Xirui Wang, Ziyu Song

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

Environmental pollution brings severe challenges in the context of a high growing economy of China. Pollution events bring serious ecological cost to the environment, direct costs from sanction, and reputational damage to the listed firms. We study the market reaction to 145 pollution events in China during Jan 2008 and Feb 2015. We find that the 2-day cumulative abnormal returns (CARs) of pollution events are significantly negative, which shows the disciplining effect of the stock market on the listed firms. In addition, pollution events with sanctions have lower CARs than otherwise, which are heterogeneous among different sanction types such as shutting down, fines and rectification. Finally, water pollution has lower CARs than other pollution types. We find that direct economic loss is an important reason for the negative market reactions to pollution events.

Original languageEnglish
Pages (from-to)3516-3530
Number of pages15
JournalApplied Economics
Volume51
Issue number32
DOIs
Publication statusPublished - 9 Jul 2019

Fingerprint

Pollution
China
Business valuation
Sanctions
Cumulative abnormal return
Market reaction
Costs
Water pollution
Economic loss
Environmental pollution
Stock market
Damage

Keywords

  • event study
  • market reaction
  • Pollution
  • sanction

Cite this

Wang, C., Zhang, H., Lu, L., Wang, X., & Song, Z. (2019). Pollution and corporate valuation: evidence from China. Applied Economics, 51(32), 3516-3530. https://doi.org/10.1080/00036846.2019.1581915
Wang, Chunyang ; Zhang, Haiyang ; Lu, Liping ; Wang, Xirui ; Song, Ziyu. / Pollution and corporate valuation : evidence from China. In: Applied Economics. 2019 ; Vol. 51, No. 32. pp. 3516-3530.
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Wang, C, Zhang, H, Lu, L, Wang, X & Song, Z 2019, 'Pollution and corporate valuation: evidence from China' Applied Economics, vol. 51, no. 32, pp. 3516-3530. https://doi.org/10.1080/00036846.2019.1581915

Pollution and corporate valuation : evidence from China. / Wang, Chunyang; Zhang, Haiyang; Lu, Liping; Wang, Xirui; Song, Ziyu.

In: Applied Economics, Vol. 51, No. 32, 09.07.2019, p. 3516-3530.

Research output: Contribution to JournalArticleAcademicpeer-review

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