Market reactions to environmental policies: Evidence from China

Yan Jiang*, Le Luo

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

8 Citations (Scopus)


The purpose of this study is to investigate Chinese market reaction to environmental-policy-related announcements from the Chinese government in response to the Copenhagen Climate Summit from 2009 to 2011. Based on a market model with a newly developed bootstrapping significance testing methodology, we find that market reactions to these policy-related announcements are significantly positive. Further, we test whether specific industry or firm characteristics can explain cross-sectional variation in these market reactions. Our results show that market reactions are more significantly positive for high-pollution industries than low-pollution industries. The study contributes to the understanding of how investors respond to announcements related to the Copenhagen Climate Summit in the context of China. In contrast to prior studies that examine directly whether a firm's abnormal return or cumulative abnormal return is negatively affected by environmental regulations, we conduct this study in a distinct way in that our results show that an expectation of delayed carbon legislation will affect a firm's abnormal return positively, which indicates that the market is likely to respond negatively to an immediate implementation of carbon legislations.

Original languageEnglish
Pages (from-to)889-903
Number of pages15
JournalCorporate Social Responsibility and Environmental Management
Issue number5
Publication statusPublished - 14 Sep 2018
Externally publishedYes


  • China
  • Copenhagen Climate Summit
  • ecological policies
  • environmental regulation
  • market reaction
  • sustainable development

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