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The equity market response to climate change litigation

Author

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  • Wu, Zhenshu
  • Zhong, Rui

Abstract

We document a significant decline in defendants' stock prices after the filing of litigation cases on climate change issues in the US. Economically, we document a 0.5% decline on the filing day and a 2.7% cumulative abnormal decline in the eight days following the filing. Cross-sectional analysis shows that the negative response is more pronounced in firms with greater external financial constraints, higher cash flow volatility, and lower environmental, social, and governance ratings. The difference-in-differences analysis shows a decline in total and responsible institutional ownership and an increase in corporate reputation risk after a climate change litigation is filed.

Suggested Citation

  • Wu, Zhenshu & Zhong, Rui, 2024. "The equity market response to climate change litigation," Finance Research Letters, Elsevier, vol. 67(PA).
    • Handle: RePEc:eee:finlet:v:67:y:2024:i:pa:s1544612324009000
    DOI: 10.1016/j.frl.2024.105870
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    Cited by:

    1. Misato Sato & Glen Gostlow & Catherine Higham & Joana Setzer & Frank Venmans, 2024. "Impacts of climate litigation on firm value," Nature Sustainability, Nature, vol. 7(11), pages 1461-1468, November.

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