Carbon Stock Devaluation
73 Pages Posted: 29 May 2020 Last revised: 30 Aug 2022
Date Written: August 30, 2022
Using global evidence, we show that high-emission firms tend to have lower price valuation ratios than low-emission firms in the same country, especially in recent years. The price gap coincides with heightened climate awareness following local natural disasters, as well as with the divestment from high-emission stocks by financial institutions and retail investors. In the presence of equity price pressure in the country, high-emission firms reduce carbon emissions, increase green innovation activities, and decrease dividends and stock repurchases. The changes we identify are unlikely a consequence of tighter environmental regulations, as private high-emission firms do not show the same results.
Keywords: Price Valuation, Divestment, Climate Awareness, Carbon Emissions, Green Innovation
JEL Classification: D83, G11, G15, G23, Q54
Suggested Citation: Suggested Citation