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How Does the Stock Market React to Announcements of Environmental Initiatives?


Brian W. Jacobs, Michigan State University
Vinod R. Singhal, Georgia Institute of Technology
Ravi Subramanian, Georgia Institute of Technology

Research Question Addressed

How do announcements of environmentally friendly initiatives affect the shareholder value of publicly traded companies?

Primary Findings

Although overall market reaction is not significant for announcements of environmental initiatives, the research finds statistically significant market reactions for certain categories of initiatives. Specifically, the research finds significant positive market reactions after announcements of the internationally recognized ISO 14001 certification as well as philanthropic gifts for environmental causes. However, announcements of voluntary emissions reductions cause a significantly negative market reaction. Thus, the market is selective in its reactions to announcements of environmental initiatives.