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Do Investors Value Environmental Corporate Policies? Evidence from the Australian Market

Author

Listed:
  • Mohinesh Chandra

    (Department of Turnaround and Restructuring, AlixPartners, New York, NY 10022, USA)

  • Alireza Tourani-Rad

    (Department of Finance, Faculty of Business, Economics and Law, Auckland University of Technology, Auckland 1010, New Zealand)

Abstract

In this paper, we explore the relationship between a firm’s environmental policies and their risk-adjusted stock returns, using a sample of stock exchange-listed Australian firms over the period of 2010–2018. We observed a positive and statistically significant relationship suggesting that a firm’s environmental policies partially explain their stock performance. Moreover, we found that investors in the Australian market significantly value a companies’ efforts to reduce emissions, and that this primarily drives the investors’ observed reaction to a firm’s social corporate policies. Next, we formed portfolios and observed that portfolios formed on high environmental, social, and governance (ESG) Environmental Pillar scores consistently outperformed those formed on low-ESG Environmental Pillar scores. Overall, our results lend support to the notion that investors in the Australian market value information about a firm’s social policies.

Suggested Citation

  • Mohinesh Chandra & Alireza Tourani-Rad, 2021. "Do Investors Value Environmental Corporate Policies? Evidence from the Australian Market," JRFM, MDPI, vol. 14(3), pages 1-12, March.
    • Handle: RePEc:gam:jjrfmx:v:14:y:2021:i:3:p:124-:d:517578
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    References listed on IDEAS

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