Research On Market Reaction To Environmental Punishment Events

With the rapid development of the economy,environmental problems have become increasingly serious.On the level of ideology,the Party Central Committee has paid more and more attention to environmental issues.On the level of rectification and implementation,the new "Environmental Protection Law",which is called the most stringent in history,has been implemented since 2015.Since its implementation,environmental supervision has become stricter and the penalties have been increasing.The environmental punishment events of listed companies have emerged one after another.In the financial sector,the international and domestic society has paid more and more attention to the greenness of the financial system,and the establishment of a green financial system has become a consensus.As an important place for financing,the stock market should also monitor the environmental protection of listed companies while helping enterprises to finance.The investor’s awareness of environmental protection investment will help guide the flow of funds to clean enterprises and improve the effectiveness of environmental protection policies.Whether the listed company’s environmental punishment cause negative reaction of the stock market can reflect the environmental awareness of stock investors to a certain extent,thus supporting policy formulation and investment decision-making.The purpose of this paper is to study the stock market reaction of listed companies’ environmental penalties and further reflect the concerns of stock market investors on the environmental performance of listed companies.This paper takes the environmental punishment events of the listed companies in the whole industry in Shanghai and Shenzhen Stock Excange from 2015 to 2018 as the total sample,and adopts the event research method and expanded Fama-French three-factor model to research whether the environmental punishment events of listed companies will cause market reaction by short-term and long-term perspectives.Then,a multivariate regression model is used to analyze the influencing factors and mechanism of the reaction.In respect of whether the environmental punishment events cause stock market reaction,the conclusion reached in this paper is: the environmental punishment events of listed companies have had a significant negative impact on China’s A-share stock market.In the short-term,the environmental punishment events have caused stock returns to fall,bringing a significantly negative cumulative abnormal rate of return,which began about three days before the event was publicly disclosed,and continued until about 7 days after.In the long run,the environmental punishment events caused significant environmental risks.The events have decreased the rate of return on stocks of listed companies that have been penalized.In the analysis of the factors affecting the market reaction,the conclusion reached in this paper is that,the year of the penalty event,the nature of the listed company,the industry in which the listed company is located,and the information disclosure channels are important factors affecting the market reaction.The later of year the environmental punishment incident occurs,the stronger the reaction of the stock market be,indicating that the new environmental protection law increases investor’s green investment consciousness year by year.Compared with state-owned listed companies,non-state-owned listed companies’ events caused the stock market to react more strongly,indicating that China’s stock investors have stricter requirements on the environmental performance of non-state-owned listed companies.Compared with non-high-pollution industries,listed companies in high-pollution industries punished cause the stock market to react more strongly,indicating that Chinese stock investors pay more attention to the environmental protection situation of listed companies in high-pollution industries.In the early stage of event announcement,the increase of information disclosure channels has significantly increased the market reaction,indicating that reprinting of the civil media plays an important role in guiding the green investment decision of stock investors.