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The Impact of Carbon Neutrality Announcement on Stock Prices: An Empirical Study on the Nordic Countries

Boilini, Ambra LU and Lehto, Jonna LU (2023) NEKN02 20231
Department of Economics
Abstract
The paper aims to examine the effect of companies announcing to become carbon neutral in the Nordic countries on their stock prices. By conducting an event study approach on the four main markets of the Nordics we find that, on average, only the Oslo Stock Exchange reacts positively to these announcements. We show that a less ambitious carbon neutrality target announcement leads to yielding higher positive Cumulative Abnormal Returns. Furthermore, we conduct a difference-in-difference analysis on the Stockholm, Helsinki, and Copenhagen Stock
Exchanges using the implementation of the EU Taxonomy as the treatment. We discover that, on average, the Taxonomy seems to have a slightly positive effect on the returns of companies that have... (More)
The paper aims to examine the effect of companies announcing to become carbon neutral in the Nordic countries on their stock prices. By conducting an event study approach on the four main markets of the Nordics we find that, on average, only the Oslo Stock Exchange reacts positively to these announcements. We show that a less ambitious carbon neutrality target announcement leads to yielding higher positive Cumulative Abnormal Returns. Furthermore, we conduct a difference-in-difference analysis on the Stockholm, Helsinki, and Copenhagen Stock
Exchanges using the implementation of the EU Taxonomy as the treatment. We discover that, on average, the Taxonomy seems to have a slightly positive effect on the returns of companies that have announced their carbon neutrality targets before its implementation. Nonetheless, the model does not have great significance power and limitations have to be addressed before concluding that investors have a more positive reaction towards companies announcing environmental commitments. This study contributes to the literature by being the first one analysing carbon neutrality announcements in the Nordic countries as well as conducting a difference-in-differences study on the topic. (Less)
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author
Boilini, Ambra LU and Lehto, Jonna LU
supervisor
organization
course
NEKN02 20231
year
type
H1 - Master's Degree (One Year)
subject
keywords
Carbon Neutrality, Announcement Effects, EU Taxonomy, Cumulative Abnormal Returns, Corporate Sustainability, Climate Change, Nordic Stock Markets, Nordic Countries, Environmental Commitments, Event Study, Difference-in-Differences
language
English
id
9120374
date added to LUP
2023-11-24 08:56:31
date last changed
2023-11-24 08:56:31
@misc{9120374,
  abstract     = {{The paper aims to examine the effect of companies announcing to become carbon neutral in the Nordic countries on their stock prices. By conducting an event study approach on the four main markets of the Nordics we find that, on average, only the Oslo Stock Exchange reacts positively to these announcements. We show that a less ambitious carbon neutrality target announcement leads to yielding higher positive Cumulative Abnormal Returns. Furthermore, we conduct a difference-in-difference analysis on the Stockholm, Helsinki, and Copenhagen Stock
Exchanges using the implementation of the EU Taxonomy as the treatment. We discover that, on average, the Taxonomy seems to have a slightly positive effect on the returns of companies that have announced their carbon neutrality targets before its implementation. Nonetheless, the model does not have great significance power and limitations have to be addressed before concluding that investors have a more positive reaction towards companies announcing environmental commitments. This study contributes to the literature by being the first one analysing carbon neutrality announcements in the Nordic countries as well as conducting a difference-in-differences study on the topic.}},
  author       = {{Boilini, Ambra and Lehto, Jonna}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{The Impact of Carbon Neutrality Announcement on Stock Prices: An Empirical Study on the Nordic Countries}},
  year         = {{2023}},
}