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Does corporate environmental responsibility create value?: The role of investors’ ESG preferences

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  • Kim, Taehyun
  • Kim, Yongjun

Abstract

We exploit novel micro-level emission data to investigate whether corporate environmental responsibility enhances stock value. This green premium is more pronounced for firms located in regions where residents have high social trust or held by shareholders with long-term investment horizons. The results suggest that the positive shocks in demands for corporate environmental responsibility among market participants drive the differences in returns between firms that successfully transition to a green economy and those that do not. Overall, the results underline the pivotal role of investor preference for ESG in generating the green premium.

Suggested Citation

  • Kim, Taehyun & Kim, Yongjun, 2024. "Does corporate environmental responsibility create value?: The role of investors’ ESG preferences," Economics Letters, Elsevier, vol. 241(C).
    • Handle: RePEc:eee:ecolet:v:241:y:2024:i:c:s016517652400274x
    DOI: 10.1016/j.econlet.2024.111790
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Corporate environmental responsibility; Green premium; ESG; Investment horizons; Social trust;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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